The Dangers of Going Bare

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By Robert E. White, Jr.,
Sr. Vice President, Regional Operating Officer
The Doctors Company/FPIC

Yet another large verdict has been rendered against a bare Florida doctor. Most recently, in September 2011, a jury found an OB/GYN and his professional association responsible for failing to detect physical disabilities of a child before it was born and awarded $4.5 million to the parents.

In the past few years, several Florida physicians have been involved in trials that resulted in multi-million dollar plaintiff awards. Six of those medical malpractice trial verdicts were in excess of $30 million. Jury awards continue to escalate, creating increased incentive for attorneys to aggressively target doctors in Florida.

While a recent national study found that 20 percent of malpractice claims against doctors lead to a payment to the patient, claims against doctors in Florida result in a payment to the patient in over 50 percent of claims. Each year about 1 in 14 doctors is the target of a claim, and most physicians and virtually every surgeon will face at least one claim in their careers. Clearly, the probability of a claim is high, and purchasing malpractice coverage should always be a serious consideration.

Many physicians and surgeons don’t fully understand the dangers of going bare, and several popular myths need to be dispelled.

Myth number one. Carrying malpractice insurance will make me a target for a lawsuit. Florida’s plaintiff ’s bar is fully aware of the monster it created. Its old habit of only suing doctors with insurance is a thing of the past. Several years ago, the plaintiff ’s bar began suing bare physicians and trying the case against the bare doctor if he or she refused to settle. Many bare doctors have paid six-figure amounts to settle cases, on top of six-figure legal bills to their defense lawyers. In many cases, the amounts paid add up to decades of insurance premiums for the bare doctor involved.

Myth number two. Florida’s cap on medical malpractice awards protects me from paying an excessive plaintiff award. The cap applies only to non-economic awards. The cap does not apply to economic awards. Economic awards are often multiples of non-economic awards rendered. Further, in McCall v. USA, a case scheduled for oral argument in Florida’s Supreme Court in February 2012, physicians face the prospect that the cap on non-economic damages they have enjoyed since 2003 will be declared unconstitutional, and the cap will be rendered null and void.

Myth number three. If I get sued and the outcome results in a plaintiff award that is greater than the amount of my ability to pay, I can declare bankruptcy to protect my personal assets. If a bare physician qualifies for certain bankruptcy laws, those laws impact the applicability of the important homestead exemption for the physician’s personal residence. Under the law, full exemption has specific requirements that could be significantly limited. Bankruptcy laws make planning difficult and limit your ability to discharge debts.

Even with bankruptcy, the judgment is in place for 10 years, so any asset obtained within the 10 years can be transferred to the plaintiff. In many cases, the 10-year obligation can be extended for an additional 10 years.

Myth number four. If I lose the case, my existing practice will allow me to maintain future income. On the contrary, judgment obligations have the potential to negatively impact your income indefinitely. All of your professional association’s account receivables could be attached to pay a judgment if not properly leveraged. If you don’t pay a court judgment, arbitration award or settlement arising from a malpractice judgment, you risk suspension of your medical license by the Florida Board of Medicine.

“Bare Insurance”—Adequate Protection?
A reputable carrier hires defense attorneys to represent you throughout the entire length of the claims process regardless of whether the costs of that defense exceed a potential settlement or policy limit amount.

There are some defense attorneys who specialize in defending bare doctors through a retainer contract or insurers that provide “defense costs only” policies as an alternative to purchasing medical malpractice insurance. They argue that exposure can be reduced by paying a pre-paid defense retainer as a way to reduce significant attorney fees. They also argue that buying “bare insurance” may reduce the amount of a judgment against a physician. Although they admit that it is not a cap on liability, they hold the belief that Florida doctors are savvy when it comes to their personal assets, thereby protecting the doctor from the obligation to pay an award in excess of $250,000.

Those attorneys have overlooked important consequences of a large judgment against a bare doctor:

  • Although the retainer reduces significant attorney’s fees, unlike full professional liability insurance, the pre-paid defense retainer and the defense-only policy have a limit that may not cover all of the expenses associated with the defense for a case that goes all the way to trial. The physician is responsible for the balance.
  • Even if a physician has protected all of his or her personal assets, the first $250,000 of the plaintiff award must be paid within 60 days.

Defense Costs
It’s very common for physicians and surgeons to equate insurance simply with paying a claim. However, in addition to the indemnity payment, defense costs must also be considered. A top-quality, well-financed defense through a two-week trial will cost approximately $150,000 to $200,000. Defense costs can, and frequently do, exceed the amount paid to the plaintiff. It is not uncommon for defense costs to exceed the policy limits. Additionally, Florida physicians now have the right to consent to settlement in the insurance policies of some insurance carriers.

Significant costs can also be incurred after the trial, even if the case is not appealed. If the lawsuit results in a verdict for the plaintiff, the plaintiff ’s attorney has the right to file a motion to recover some of the costs the plaintiff incurred as a result of trying the case. Those costs are generally in the range of $50,000 and can exceed $100,000 in some cases.

Non-Payment of a Claim—Another Potential Consequence
Payment on the judgment or arbitration award must be made within 60 days after the date the judgment was made. For bare physicians who have endured the costs of a trial, bond obligations, and potential appeal, making such a payment on the judgment within the 60-day requirement may be extremely difficult, if not impossible.

Without medical professional liability insurance, a physician carries the full responsibility for the costs associated with a claim, regardless of whether the claim is arbitrated, settled, defended in a trial, or subsequently appealed. Even the reversal of a plaintiff award could have a significant, if not devastating, impact on the doctor’s financial status, including personal assets.

Those who decide to go bare and believe purchasing bare insurance is sufficient need to be aware that bare insurance most likely will not adequately cover all of the costs associated with a claim. They also must consider that the provider of prepaid legal services or a defense-only policy may have economic incentive to take short cuts in the defense since the provider does not have to face the financial consequences of a large plaintiff ’s award. While the bare doctor can sue the provider for a less-than-adequate defense (at the doctor’s ongoing expense), the outcome of that lawsuit will still be uncertain, and relief, if any, will be years away.

The ability to afford the expenses related to a claim is only one of many challenges for bare physicians. There is almost always an emotional toll; physicians are committed to providing the best possible care for patients. When a patient is harmed or perceives there has been inadequate care, the stress associated with the lengthy claims resolution process can be overwhelming. Going bare is a significant professional and personal risk. A reputable professional liability insurance company is not only your best protection against a claim, but it also reduces the emotional toll because you have the peace of mind of knowing that you have a knowledgeable ally directing and financing your defense.