Money Scheme

Something I learned from my Torts class (lawsuits):

So, somebody, let's say Mr. Driver, is a bad driver and injures a pedestrian on the street, Mr. Walker. Bad accident. Serious injuries. And it was all Mr. Driver's fault.

Ambulance comes, Mr. Walker is taken to the hospital, scans are done, tests are run, operations are performed.

Hospital bill comes to Mr. Walker for $100,000.

Mr. Walker doesn't have $100,000, but he talks to a tort lawyer, who tells him he's got a strong case against Mr. Driver.

"So if I hire you as an attorney, how much will that cost me?"
"Like many personal injury lawyers, I charge on a contingency basis. So if you hire me and we win, then I get a percentage of the money Mr. Driver pays."
"How much?"
"If we settle things before a trial, 30%, and if the case does go to trial, 40%"
"But if we lose, then you don't charge me anything?"
"Right."
"Ok"

One of the first things the lawyer does is find out how much Mr. Driver is worth. Because if he doesn't have any money, then it's pointless to go after him. Unless his car insurance covers it, which it ought to.

Lawyer goes to hospital and says: Look, if I win the case, then Mr. Driver will pay Mr. Walker $100,000, but then I'll get $30,000 of that in attorney's fees. And then Mr. Walker will owe you $100,000, but he'll only have $70,000 left. So he'll be $30,000 in debt to you. Not a happy situation for him.

If I lose, then he'll be $100,000 in debt to you. Not a happy situation for him or for you, the hospital.

So you really want me to win. I'm fighting this case for him, but indirectly, for you, too. Because you'll be the ones to benefit if I win. So because I'm doing this legal work for you, I want you to give a discount to Mr. Walker, and charge him only $70,000 instead of $100,000.

Hospital says: ok. They send a second bill that says: forget the first bill. You only need to pay us $70,000.

Lawyer files papers with the court. "My client was injured by the negligent driving of Mr. Driver, and because of his injuries, his hospital bill came out to $100,000." The court should force Mr. Driver to pay Mr. Walker $100,000 for medical expenses, plus [some extra amount] to compensate him for the pain and suffering he has experienced and will experience from these injuries.

Who argues on the other side? Does Mr. Driver hire his own lawyer? Probably not. It's his car insurance company that has lawyers on staff.

Now if you sort of jumped into the middle of this, and knew about both hospital bills, the one for $100,000 and the one for $70,000, you might think that the lawyer is up to no good. But now you know the big scheme of things, and see that Mr. Walker, after navigating the legal system, will probably agree to a settlement for less than $100,000 to avoid the expense and length of time (could be several years) involved in a trial. And the hassle of going against the insurance lawyers.

Maybe it'll be a settlement for $90,000 + $20,000 [pain and suffering award]. Then $27,000 will go to the lawyer, and $70,000 will go to the hospital.

While the court thought that his pain was the equivalent of $20,000, he actually goes home with $13,000 after paying off the hospital and his lawyer.

"In our society, we don't want injured plaintiffs to reach for their hatchets [to get revenge]; we want them to reach for their lawyers"

I don't want to be a tort lawyer. I'm still true to the reasons that brought me to law school in the first place. Or at least, I believe I am. Still, this is the society we live in, our system.

Your comments? thoughts?