Public Health Law Map - Beta 5 - Medical and Public Health Law Site

as they arise, with offsets for both increased and reduced needs. This is
incompatible with having lawsuits result in fixed obligations.
The remaining alternative is to retain the lump sum determination but to pay out
the lump sum only as it is needed by the plaintiff. This is termed a structured
settlement and is available only in a structured manner. Structured settlements may
be agreed to as part of the overall judgment in a case or required by the court if the
plaintiff is a minor or the state has a specific statute requiring that certain awards
be structured.
Plaintiff’s attorneys have an ethical obligation to inform the client fully of the value
of entering into a structured settlement. Many attorneys will even reduce their fees
to provide an incentive for the client to waive a right to the lump sum.
There have been many proposals to require that all large settlements and verdicts
be paid on a structured or periodic payment basis. The intent is to ensure that
money is available to meet the plaintiff’s needs and to allow the defendant to
recoup any unused money. This can happen when a plaintiff does not live long
enough to use up the projected nursing and medical care allowances. In one
extreme instance, a quadriplegic plaintiff was awarded more than $1 million for
future medical needs. The plaintiff died shortly after the settlement papers were
signed, and the money went into the plaintiff’s estate. In this case, a periodic
payment law would have led to a more just result.
There are problems with structured settlements. Most periodic payment proposals
are not symmetric; the defendant’s contribution is reduced if the plaintiff’s needs
diminish, but it is not increased if the plaintiff’s needs were underestimated. A
second problem is that they make the calculation and awarding of attorney’s fees
difficult. The value of the award must be reduced to net present value and fees
calculated and paid as a lump sum in addition to the periodic payments. The most
serious problem is ensuring that the defendant will be solvent during the period
over which the award must be paid out. The usual way to handle this is to require
the defendant to buy an annuity from a third-party financial institution. The
defendant will want to buy the least expensive annuity that will provide the
necessary payments to the plaintiff. Since the stability of the financial institution is
a factor in the pricing of annuities, the least expensive annuity may be backed by
the least stable institution. If the institution fails, the plaintiff will receive no
compensation.
D. Products Liability
Physicians become involved in products liability litigation as witnesses and
defendants. When medical devices fail, injured patients usually sue the physician using
or prescribing the device, as well as suing the device manufacturer. Lawsuits involving
products are brought under the legal theory of strict liability because they use a less
rigorous standard of proof than a negligence lawsuit. The general form of this standard
is found in the Restatement of Torts, Second, section 402a. (The Restatement is a
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