Check policy now for 'consent-to-settle' clause
If physicians who were additional insured on a group practice policy leave their practices, and later are the only defendants in a medical professional liability action on that policy, they might find themselves unable to settle the claim.
"The former practice might not consent to the settlement, in order to prevent a payment impacting its premium," says Stephanie A. Sheps, Esq., director of claims at Coverys, a Boston-based provider of medical professional liability insurance.
In some scenarios, consent might rest with entities who are not a party to the action or entities from which the physician defendant is estranged, Sheps explains. "In this instance, there are few, if any, remedies to the physician, other than to appeal to the policyholder's logic and reason," she says.
Too often, physicians are unaware of "consent to settle" or "hammer" clauses included in their professional liability insurance contracts — until litigation occurs, warns Jonathan Katz, president of Oros Risk Solutions, an Orlando, FL-based insurance and consulting agency specializing in selling medical professional liability insurance.
Consent to settle clauses provide that the insurer will not settle any claim without the insured's consent, as long as consent is not withheld unreasonably, explains Sheps. "These types of clauses are often found in professional liability policies so that the insured maintains an additional measure of control over his professional reputation and potential impact on future employment and licensure," she says.
Though professional liability insurers typically involve the policyholder in decision-making for case disposition regardless of the presence of such a clause, they serve to ensure that the policyholder's position on settling a case is considered and followed in the event there are opposing views on the matter, says Sheps.
Katz says, "There are different variations of consent to settle, and there are different state-specific legal requirements that have allowed for it or not." In Florida, to the benefit of plaintiff attorneys, consent to settle clauses were against public policy to be included in policies for physicians for many years, but this legislation recently was overturned, he reports. "Plaintiffs may invest $200,000 or more on these cases, and as they are typically on a contingency fee, risk getting nothing in return if they don't win," says Katz. "If they can get the insurance company to settle with them, they don't have to take as much risk or invest as much work hours and money, and they don't have to wait for the reward."
Regardless of whether a policy includes a consent to settle clause, the liability insurer should be mindful of the physician's feelings about settlement, says Sheps.
"Claims professionals and defense counsel are aware of the professional and personal ramifications of paying a claim and give them due consideration when determining case disposition," she says.
Look for "hammer" clauses
Katz advises, "Look at the fine print in your policy. Make sure there is not a 'hammer' clause. We see this quite often in the excess and surplus lines insurance market or with lower-quality risk retention groups or start-up companies." (See related story, below, on what physicians should consider before purchasing medical malpractice insurance.)
"Hammer" clauses shift the risk back to the policyholder in the event of an adverse verdict if they withhold consent after the insurer has recommended settlement, says Sheps. "A 'hammer' clause is designed to compel the insured to consent to settlement by providing financial consequences to the decision," she explains.
For example, if the insured refuses consent to a settlement or compromise that is acceptable to the claimant and elects to take the matter to trial, a hammer clause might provide that the insurer's liability will be capped at the amount for which the claim might have been settled plus expenses, regardless of whether the available policy limit was higher than that amount.
"The insured would be responsible to pay the balance of this judgment," says Sheps. "Physicians should read these clauses carefully and understand their potential exposure in the event of an adverse verdict."
Physicians should also consider who has the right to consent when their policies contain a consent to settle provision, and this is especially important when a physician is an additional insured on a hospital or group policy, she says.
Usually, the right of consent will be given to the "named insured" on the policy, which is often the hospital or group, says Sheps. "It is critical for physicians to read and understand the policy's definition of "named insured" in those instances," she says. "Have a clear understanding of the hospital or group's interpretation of the policy."
- Jonathan Katz, President, Oros Risk Solutions, Orlando, FL. Phone: (407) 745-2892. Email: firstname.lastname@example.org.
- Stephanie A. Sheps, Esq., Director, Claims, Coverys, Boston. Phone: (617) 526-0228. Fax: (617) 946-8618. Email: email@example.com.
Buying policy? Money isn't the only factor
Physicians often can be short-sighted when buying malpractice insurance
The cost of your premium and your policy limit aren't the only things to consider when purchasing medical malpractice insurance.
"Often, whoever comes in with the lowest price is what the doctors want," says Jonathan Katz, president of Oros Risk Solutions, an Orlando, FL-based insurance and consulting agency specializing in selling medical professional liability insurance. "But that is a very short-sighted approach."
Here are some often-overlooked factors to consider when buying malpractice insurance:
• Whether the company has a legitimate rating of A or better.
"Just as in medicine, where there are legitimate board certifications and there are certifications that are not recognized as valid that you can just take a weekend course to obtain, the same thing is true with financial rating companies. Some rating companies will give out an 'A' rating that we don't believe is legitimate," Katz cautions. He adds that Oros recommends a company rated "A" or better by A.M. Best Co.
• The amount of money the insurance company has put away to pay claims.
"You want to be with an insurer that is financially secure, which can invest in the best defense and best expert witnesses," says Katz. "Some start-up insurance companies writing medical malpractice policies have a very small surplus."
In meetings with medical groups, Katz has sometimes determined that the combined net worth of the physicians in the group was more than the surplus of the insurer they were considering. "When you have more money to pay claims than your insurance company, that's a problem," he says. "You have to look at the financial backing of the company. What happens to you if the company goes under because it's poorly capitalized?"
• The way the insurer handles claims.
Some insurance companies just want to deal with claims the cheapest way possible and will try to use every angle in the policy to get out of a paying a claim, says Katz. "Others are physician-centric and take a long-term approach. They like to go to court and send a message that they are not an easy target," he says. "Look at the company's culture around how they handle claims."
• The availability of patient safety and risk management resources.
"Most of the major companies have risk management and patient safety departments, but some do a better job than others," says Katz. "Maybe there are no claims currently, but the group wants to get better in certain areas."
Physicians often fail to take advantage of the resources available to them at no cost, such as site assessments and training, though. "They may have been with a company for ten years and extracted zero resources," says Katz. "We see that all the time."
• Experience and success rates.
Consider the insurer's win ratio at trial, how long they have operated in your state, and whether they handle claims themselves or hire a third party to do so, advises Katz.
"When you have a claim, you want to make sure they have the experience and the financial strength to go fight it and win," he says.