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Nick Avgerinos
Nick Avgerinos
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It’s Never Too Late To Say You’re Sorry (But Earlier Is Better for Business)

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To apply the law to a given situation, specific facts are needed. Legal battles then center upon a game of “he said, she said,” leading to a messy fight and often less-than-ideal resolution. But what about the truth? You can’t handle the truth. At least that’s what we’ve been told. But what if we laid all the cards on the table right away?

I recently wrote about the financial reward doctors may get for admitting their mistakes in “Slice of Humble Pie: Doctors may get Cash Bonus for an Apology.” In it, I referenced the recent New York Times editorial with data suggesting that a simple “I’m sorry” or upfront offer of fair compensation, depending on the situation, decreases the chances that a claim will be brought, thereby eliminating the need for litigation. Straight-shooting from doctors: we save time, they save money. Everybody wins.

But what about personal injury claims? Someone is hurt and someone is to blame. Everyone wants compensation but no one wants to pay. Sound about right? Well, maybe businesses should consider a new strategy. I just came across an article claiming that they, too, can reap financial rewards for a similar forthrightness.

The study, conducted by University of Virginia Law School Professor Jeffrey O’Connell and Associate Professor of Finance Patricia Born of California State University-Northridge, examined court settlements of businesses facing personal injury cases between 1988 and 2004 in Texas and Florida. What did they find? Promptly paying plaintiffs’ out-of-pocket medical expenses and lost wages can save businesses money as well as time. The upfront acknowledgement of fault circumvents lengthy courtroom battles and decreases the prevalence of “pain and suffering” awards.

In a time of complex mergers and acquisitions, something as simple as an “I’m sorry” is too often overlooked. Businesses become entangled in lawsuits for a multitude of reasons, but here is a simple way to get out of personal injury suits as quickly as possible. Just fess up; sometimes it’s okay to settle. Swallow those excuses along with a slice of humble pie and focus your energy on making things right. The reward? The study estimates that companies could save an average total of $114,000 per claim or $670,000 for severe injuries by promptly settling cases instead of fighting them in court. Not bad.

O’Connell and Born propose an early offer system that would give businesses 180 days to offer claimants payments for their medical expenses and lost wages. O’Connell explains this proposal, saying, “Thus a crucial element of the tort system’s deterrence mechanism is retained: Injured parties could still win suitably large monetary awards under the early offers model for both economic and non-economic damages in clear cases of aggravated error.”

Would such a system suit everyone’s purpose? The victim receives acknowledgment and prompt compensation, and the business can cut its losses, not losing time and money entangled in a lawsuit. Sounds good. Then again, businesses might not be ready to claim responsibility; maybe they’re not actually at fault. And maybe victims would rather hold out for a larger award. Maybe not so good. O’Connell and Born’s study provides interesting data, but the merits of their proposal, and early settlement in general, still have to be weighed on a case-by-case basis.