How Medical Malpractice Gives Doctors a False Sense of Security (And How to Actually Be Secure)
Doctors who practice in the United States practice in the most litigious field in the most litigious country in the United States.
To mitigate the risk posed by malpractice litigation, and to purchase peace of mind, doctors purchase medical malpractice insurance.
But what does malpractice insurance actually cover?
In its simplest form, a liability insurance contract is an agreement between the insurer and the insured where each makes a simple promise: the insured promises to make premium payments, and the insurer promises to provide coverage if an insurable event occurs.
That insurance coverage is divided into two parts: the duty to defend and the duty to indemnify. The duty to defend relates to the insurer’s obligation to hire and pay for a defense attorney. The duty to indemnify relates to money paid by the insurance company on the insured’s behalf to compensate the claimant/plaintiff for an alleged loss (whether or not the insured doctor or insurance company admits fault).
Policies vary between insurers, fields, and states, based on a number of factors, including differences in laws from state to state. But every insurance policy has a limit. And whatever that limit, the insurance company will only indemnify a doctor (i.e. make payments not the doctor’s behalf) up to that limit.
That means that if a jury returns a verdict in excess of the insurance limit, the doctor is personally on the hook for the difference.
That’s not just scary, that’s terrifying. Especially when you consider how far a runaway jury can run.
Anyone can search the internet for high medical malpractice verdicts, but we didn’t have to. We personally know three attorneys in different parts of the country who have recently garnered very large malpractice verdicts, including a $48.6 million dollar verdict by the Gage Law Firm here in Nevada, a $73.21 Million Dollar verdict by Kent Buckingham in New Mexico, and a $46.5 Million Dollar verdict by Jim Lyons in a small conservative town in Arkansas.
Statistically, a doctor probably won’t be the victim of a runaway jury. But they will get sued. And even before you’re sued—as soon as a demand is made—the National Practitioner’s Data Bank (NPDB) rears its ugly head.
The NPDB was purportedly created to promote safe healthcare, but in reality, it only serves to create a permanent, public, black mark on any doctor who has ever had a payment made on his behalf to a patient demanding money for negligence.
Doctors understand the dangers of being named on the NPDB—their insurance premiums could go up, or they could be denied coverage altogether. They could lose privileges or even their medical license.
Most doctors are aware that if they make payments out of their personal funds to settle a case, they don’t get reported. So many doctors are willing to use their own money instead of the insurance’s money to keep their name off the NPDB’s list.
But that’s not exactly a good plan. It goes against principles of asset protection planning and certainly undermines the entire purpose of having insurance.
There are other exceptions to the reporting requirement that are less well known, including certain types of pre-suit mediation settlements and becoming part of a clinical practice group.
If doctors settle before a written demand for money is made (something only possible if the doctor plans ahead with every patient—and can be accomplished through careful drafting of patient agreements), then the insurance company can foot the bill, litigation can be avoided, and the doctor’s reputation remains unmarred.
Alternatively, if litigation does ensue, and the doctor is part of a clinical practice group, the doctor is no longer faced with two bad choices: settle and have your name reported or go to trial and risk it all. Now the doctor’s attorney can work with the plaintiff’s attorney to fashion a settlement, again paid by the insurance company, that keeps the doctor’s name clean.
Speak to the Fortune Law Firm about how to take advantage of these two license shields.
Watch this video for more information: