The determinants of medical malpractice incidents: Theory of contingency fees and empirical evidence

A common criticism of the contingent fee arrangement is that it increases the total number of claims [Dietz et al., 1973, pp. 87-167]. This is true. But without contingent fees, risk averse plaintiffs would not offer the fair value of an incident and, as a consequence, would bear more of the cost of medical malpractice. This conclusion was reached in Section II by examining an expected utility model of plaintiff's decision-making. Section III presented empirical evidence on the determinants of malpractice incidents per capita. High income, exposure to surgical operations, and a favorable legal system encourage incidents. The supply price of lawyers' time is negative and significant.