Bibliography: Nora Freeman Engstrom, Shining a Light on Shady Personal-Injury Claims, 2 Journal of Insurance Fraud in America 13 (Fall 2011).
If insurers reduce claim payments when they suspect fraud and improper inflation, law firms that facilitate or encourage such practices would have low net recoveries and low loss-to-recovery ratios. So, again, to the extent that publicity draws attention to net recoveries and ratios, more-ethical plaintiffs’ law firms would fare better, and closing statements could powerfully curb firms’ inflationary impulses. To be sure, this proposal is far from perfect. Despite safeguards, some firms will manipulate the data or fail to report altogether. Some clients still might retain bad and shady lawyers. The worst offenders might only be marginally deterred. But this is a low-cost reform with potential to create new disincentives for fraudulent and exaggerated bodily-injury claims — while having numerous other positive effects.