Between the Lines

A Discussion of Case Law and Statutory Law Affecting Commercial Lines of Insurance


A Bird in the Hand? The New Hampshire Early Offer Statute

On January 1, 2013, a New Hampshire statute intended to streamline medical malpractice litigation by allowing claimants to invoke an “early offer” process will take effect.  Under the statute, claimants and their families may elect to forgo certain categories of damages available at common law (including pain and suffering and loss of consortium) in exchange for expedited payment of “economic” losses.  The statute was adopted after a super-majority of the Legislature overrode Governor John Lynch’s veto.  Whether the statute will prove a welcome alternative to the current path of pretrial screening by a medical review panel followed by traditional litigation or a trap for claimants that will be avoided by all but the unwary is the subject of heated debate.

Insurance Coverage Issues

The early offer process raises some interesting insurance coverage issues.  Many professional liability policies prohibit insureds from making voluntary payments and require insureds to co-operate in the defense of claims.  Under the New Hampshire statute, which is summarized below, providers are not required to make an early offer.  If a provider opts to make an early offer without obtaining the insurer’s consent, may the insurer deny coverage on the ground that the insured violated the voluntary payments clause?  Or breached his or her duty to cooperate?  Or will New Hampshire courts hold that public policy prevents insurers from applying voluntary payment and co-operation clauses to deny coverage for early offers?

Invoking the Early Offer Process

For a detailed summary of the statute’s provisions, click here.  In brief, however, claimants who wish to proceed under the “early offer” system send a “notice of injury” to the provider.  The notice requests an early offer and contains a description of the claim and the claimant’s injuries, along with supporting medical records and bills and documentation of lost income.

Damages Available through the Early Offer Process

Providers are not required to make an offer, but if they do, the offer must include compensation for the claimant’s “economic loss.”  The statute defines “economic loss” to include the claimant’s medical expenses; income lost due to the injury; and expenses incurred to replace services that the claimant would have performed for the benefit of his or her household but for the injury (“replacement services”).  The statute explicitly states that “economic loss” does not include several categories of damages available at common law, including pain and suffering, loss of enjoyment, diminution of earning capacity and loss of consortium.

A provider’s offer also must include:  (i) an “additional payment” in an amount that currently ranges from $2,000 to $140,000, depending on the severity of the injury, and (ii) the claimant’s reasonable attorney’s fees (fixed at 20% of the present value of the claimant’s “economic loss”) and costs.  Providers who make an early offer are liable for future medical expenses and lost wages as they are incurred, although the parties can agree on a lump sum payment, which must be approved by a hearing officer.  Wrongful death cases are subject to a separate provision, under which lost wages and the cost of replacement services are calculated over the decedent’s expected lifetime.

Risks to Claimants Who Receive but then Decline an Early Offer

A claimant who receives an early offer may accept it, reject it, or request a hearing on the ground that the offer does not include all of the payments to which the claimant is entitled.  The hearing officer, whose fees are paid by the provider or, if applicable, the provider’s insurer, has authority to modify the offer.  If the claimant rejects the provider’s early offer or the offer as modified by the hearing officer, the claimant may pursue an action for medical malpractice.  If the claimant does not recover damages that are at least 125% of the early offer, however, the claimant will be required to pay the fees and costs incurred by the provider in connection with the early offer proceeding.  The claimant must also post bond or other security for payment of the provider’s fees and costs.

Proposed rules promulgated by the New Hampshire Insurance Department for dispute resolution in early offer proceedings are available here.  Click herefor a summary of the Massachusetts Health Payment Reform Act, which includes a somewhat analogous six month pre-suit notice and “cooling off” period.

Anne Robbins
(617) 621-6553

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Anne Robbins

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