Liability Insurance Expert Answers Questions on ‘Consent to Settle Authority’ Law, Potential Risks to Look Out For, and More
Malpractice insurance entered a new territory recently for physicians and insurers handling liability lawsuits, with a new law passed in October 2011 called Consent to Settle Authority. Dan Reale, a malpractice insurance expert from Danna Gracey Insurance in Orlando explains what the new law entails for physicians, patients, and insurers, as well as how physicians can determine the best malpractice insurance and prevent a liability lawsuit before it starts.
Central Florida Doctor (CFDr): What does Consent to Settle Authority mean for malpractice lawsuits?
Dan Reale: As of October 2011, Florida changed the statutes to allow the doctor to have the authority to consent or not to a settlement offer. The Florida Medical Association and doctors have fought for the right to refuse to settle malpractice claims for nearly 30 years. If the insurance company agrees to have that as part of their language, then they are giving the authority to the doctor to determine if they will defend a lawsuit or offer a settlement. There is more at stake in personal liability coverage where the physician has their reputation at stake, their earnings and their ability to get insurance in the future when a claim is posed against them. Another major difference is that a plaintiff has to prove that there was a breach in the standard of care or direct negligence by the doctor before they go to a juried trial. They have to show that this wasn’t just a bad outcome in their care but the doctor was at fault in care.
CFDr: What is consent to settle?
Reale: In many standard insurance policies, the authority to defend or settle a claim will normally rest with the insurer. This is common for most automobile, homeowner, and general liability type insurance policies. The insurer may settle purely for economic reasons and does not need consent from the policyholder. Professional liability policies protect doctors against malpractice and regulatory type claims. Doctors can be exposed to greater indirect damages if a claim is settled simply for economic reasons. There is a permanent public record of all claim settlements made against doctors in Florida. Therefore, a settlement can damage the doctor’s reputation, future earnings, and even their ability to obtain malpractice insurance in the future.
CFDr: How would a doctor go about finding the right liability insurance for their practice?
Reale: There are about 8-10 standard malpractice insurance-admitted companies in Florida, which means they follow the guidelines for malpractice insurance. They file with the state each year and their rates are approved by the state, for rate increase or decrease. These are special lines of insurance and there are only certain companies that offer that coverage.
Any of these companies will write insurance for any MD or DO, so it is up to the doctor to determine if there are any differences in the policies, if one of the policies has a greater advantage over another, and what the pricing differences are. Our agency is an independent agency so we work with all the top carriers, and we help physicians and physician groups shop for different insurances in the market. It would also be prudent for doctors to consider carrying greater liability limits of coverage to lessen this exposure. Doctors who carry greater liability limits will be more confident to defend against a lawsuit when the limits are sufficient to cover any bad outcome at trial.
CFDr: Why is it so important to have malpractice liability insurance?
Reale: You should have insurance because a lawsuit can be made for any reason. There doesn’t have to be cause for a lawsuit and once a lawsuit is filed, the doctor must defend themselves against the lawsuit even if it is without merit or cause. They still have to have the lawsuit dismissed or settled. The most valuable parts of a malpractice insurance policy are that it provides for 100 percent of the legal costs, there is no deductible, and an expert defense is provided. If a doctor doesn’t carry insurance, they would have to find their own defense and claim service or hire an attorney.
CFDr: What should a doctor do if a liability lawsuit has been brought up?
Reale: Just like any other claim, the physician needs to give the notice to his insurer and the insurer would assign counsel, a claim manager, to the case. The manager would investigate the claim and then determine if there is any liability. If the claim went into a lawsuit, the insurer would provide legal counsel to defend the lawsuit or settle the claim, if that is an option.
CFDr: What is a “worst case” or bad outcome at trial?
Reale: Imagine that the patient has an unrealistic view of winning and refuses any reasonable settlement offer. A lawsuit can take three to four years to resolve and the effort will cause the physician stress over this time. The doctor feels confident that the defense will prevail and rejects the plaintiff’s demand for policy limits. If the jury awards the patient an amount that is greater than the policy limits, then the doctor is exposed to a secondary claim for collection of any judgment amount above their insurance coverage’s limits of liability. The doctor will be responsible for all damages that exceed the policy limits, plus further punitive damages and legal costs. It is important to note that the jury is never told the policy limits that are carried by the doctor, so this will NOT be taken into account when the award is made.
CFDr: How would a doctor recognize potential liability while in practice?
Reale: A doctor may receive a complaint from a patient or have a disgruntled patient that they might feel would go talk to an attorney about their care. If a mistake was made and is admitted to by the doctor, they would need to tell their malpractice insurer about the incident and the insurer would set up an incident file pending any other notice from the patient. If it’s a minor incident and requires a small amount to settle it, the doctor can handle it with his insurance company resolving the claim. Just make sure to report any incident to your malpractice insurer before it turns into a lawsuit. The biggest danger with new doctors is that they don’t know the exposure that they face. When they are out of residency, they want to do it all, similar to the “Superman Syndrome.” If a lawsuit is brought upon them early on, that could hurt their income 10 years or more into the future. Malpractice is a very broad field and agencies, like our agency, can provide educational information about medical malpractice. We even do lunch ‘n’ learn programs for resident to professional physicians so they know the pitfalls to avoid with medical malpractice.