When negligence is proven in states that still allow joint and several liability, even 1% liability can leave you responsible for the entire amount. The solution is to have reasonable—but not excessive—coverage. Many believe this balance lies at $1 million/$3 million limits.
Desire for a payout may persuade a plaintiff to settle for policy limits
If you have coverage of up to $1 million and a court delivers a higher judgment, what happens?
It depends. In theory, you are liable for the overage; the carrier will pay up to the policy limit, and you are responsible for the rest. In reality, however, the situation is more complex.
You often have the right to demand a new trial or appeal the case. You may not prevail, but this approach creates new risks for the plaintiff right after “victory” is tasted. Rather than roll the dice, many plaintiffs, under the advice of their attorney, will reconsider and settle for the policy limit. It is in their interest to lock in a certain figure rather than prolong the case, exposing themselves to increased risk. And if the judgment makes it clear that bankruptcy is an option for the physician, a plaintiff will take pains to prevent that end game. Once bankruptcy is filed, the clock slows, and it may take years for the plaintiff to receive any funds. Even then, the plaintiff may have to wait in line behind more senior creditors.
Consider asset protection
Asset protection prior to litigation can affect the dynamics of posttrial settlement discussions. Asset protection means many things, and there are different degrees of protection. A limited number of attorneys are skilled in asset protection, and plaintiff’s attorneys generally have limited experience breaking through the shield.
With a robust asset-protection program in place, you can come to the table with greater leverage and engage in a more rational discussion about a just settlement in which most, if not all, of the settlement will be within the policy limit.
There are approximately 50,000 to 60,000 medicolegal cases open at any given moment, but the number of physicians involved is much higher because many suits name multiple defendants.3 In 2004, the National Practitioner Data Bank (NPDB) reported entries for more than 200,000 health-care providers since 1990, most of whom had been reported just one time.4 Again that number is low because not every physician who is sued is reported to the NPDB. Reporting is required only if payment is made by settlement or judgment related to a written demand by a plaintiff. If the case against the physician is dismissed, or the physician wins in court, no report is entered. So the 200,000 entries are just the tip of the iceberg. With roughly 700,000 physicians practicing in the United States, the number of physicians affected by liability litigation could be staggering.
When you want to settle, but the carrier doesn’t
Ordinarily, your interests and those of your carrier are aligned. You both want to win—or at least lose less—but there is one scenario in which your interests may diverge. That is when you believe you are at risk for a judgment that will exceed the policy limit. In such a situation, you want your carrier to tender the full limit, but the carrier faces a worst-case scenario: paying the maximum amount on the policy.
If the carrier believes the case is defensible, it may choose to fight, hoping to win or receive a judgment well below the policy limit. If the carrier’s strategy prevails, all parties will be better off. However, if the carrier gambles and loses, you will face the very scenario you hoped to avoid—exposure to a judgment beyond the policy limit.
The law generally provides that a carrier that wants to gamble must do so with its own money. To do otherwise constitutes action “in bad faith.” After judgment, many physicians sue their own insurance company on the basis of exactly that legal theory. It is even more common for a plaintiff, fresh from victory, to join forces with the doctor defendant and take action against the carrier.
This endgame is not automatic, however. If you want to minimize the risk that your pocket will be the only one left to pick after a high-stakes case ends, you must demand in writing that the case be settled up to the policy limit. Under such circumstances, it is best for your personal counsel to deliver that message because the carrier-appointed attorney faces something of a conflict, because she is an advocate for the physician but paid by the carrier.