Why excess-limits verdicts against physicians are rare and not something you need to plan for financially
There is a great scene in the movie RED (Retired, Extremely Dangerous) in which John Malkovich invites Bruce Willis and Mary-Louise Parker “in to see the place.” Instead of heading toward the house, which is in plain view, Malkovich lifts the hood of a junked car, revealing a stairway down into the bunker that is his real abode. Parker, befuddled, asks, “What’s the house for?” Malkovich, intent on protecting himself from assassins and scornful of Parker’s ignorance, scoffs, “Decoy, of course.”
Not all of us have been advised to live in a hidden bunker, leaving our house vacant in order to protect against black-op hit teams, but if you’re a physician, it’s almost a certainty that you’ve heard that you should dig a figurative bunker for your assets (ie, take steps to shelter your assets from being taken away in the event of an excess-limits verdict in a medical malpractice case). Not only have all physicians heard this bit of unchallenged wisdom, but for those who want to heed such advice, there are plenty of financial and legal advisors who are only too happy to take some of that money you’re trying to protect. The only problem is that the chances of your suffering an excess-limits verdict and having your personal assets attached are exceedingly small. It’s certainly more likely than the chance of a black-op hit team visiting you in the dead of night but far less than the chance you’ll one day wish you hadn’t “protected” your assets.
Consider your own experience. We’ve all heard the advice: “Protect your assets.” “Put your house in your spouse’s name.” “Establish a trust.” “I know a financial advisor who can fix you up.” And we’ve all heard of those multi-million dollar plaintiff verdicts that just happen to be in excess of the defendant doc’s insurance coverage. But even though you’ve heard all this advice, do you actually know of many cases—or even a single case—where physicians have had their personal assets taken away? Probably not. Although such cases can theoretically occur, in reality, they are exceedingly rare. Here’s why.
“And we’ve all heard of those multi-million dollar plaintiff verdicts that just happen to be in excess of the defendant doc’s insurance coverage. But even though you’ve heard all this advice, do you actually know of many cases—or even a single case—where physicians have had their personal assets taken away? Probably not. Although such cases can theoretically occur, in reality, they are exceedingly rare.”
–Michael Frank, MD, JD, FACEP, FCLM
Med-mal suits that end with a verdict for the plaintiff are unusual to start with. Only a small number of med-mal suits go to trial. The large majority are either settled within policy limits or are dismissed without payment. Of the cases that go to trial through to verdict, the jury finds for the doc roughly 75 percent of the time. Of the remaining 25 percent cases where the jury finds against the doctor, many, if not most, will be for an amount within policy limits. That’s point number one: excess verdicts are rare. They usually get more press coverage than all of the other cases, and that may be why physicians think the threat is more significant than it really is.
There’s another reason you probably don’t know any physicians who have had their assets taken away by an excess verdict. Even when there is an excess verdict, it is rare for the full amount of the verdict to stand or to be enforced. When a jury delivers an excess verdict, things start getting very interesting in ways that don’t generate the headlines that the original verdict did. A number of potential scenarios begin to play out long before the physician actually has to cough up any bucks. Here are just two of them:
- Compromise settlement after verdict: There are very few trials that don’t have some colorable error in procedure that can form the basis of an appeal. Suppose the verdict against you is for $5 million and the coverage limit of your policy is $1 million. After the verdict, your attorney approaches the plaintiff’s attorney, congratulates him on the win, and tells him the verdict will be appealed. The plaintiff’s attorney knows that an appeal will take a long time, perhaps a few years, and the result, just like the result of a jury trial, can never be predicted with certainty. The appeal might even result in an order for a new trial or, worse yet, an order that the jury’s decision be thrown out and the original lawsuit dismissed! Your attorney offers an alternative, a compromise: accept $1 million from the insurance company as a full settlement, and there will be no appeal. The plaintiff’s attorney knows that even if the verdict is affirmed on appeal, he still won’t get more than $1 million from the insurance company (because that’s the limit of the insurance company’s liability), and the chances of getting $4 million (or anything close to that) from most physicians are slim to none. Moreover, the plaintiff’s attorney also knows that if the appellate court reverses the trial court and orders a new trial or, worse yet, strikes down the verdict entirely, his $5 million verdict may turn into just another losing lottery ticket. What do you think the plaintiff’s lawyer is going to do? I don’t think most plaintiff’s attorneys want to go after a physician’s personal assets, but that conclusion is derived from what plaintiff’s lawyers have to say on the matter. Gerald Gillock is one of the more prolific med-mal plaintiff attorneys in Las Vegas, a venue traditionally friendly to plaintiffs and a perennial nominee for the American Tort Reform Association’s annual “Judicial Hellholes” report (www.judicialhellholes.org). In 2002, Gillock was pursuing a case where coverage limits of the defendants totaled $6 million: “Such a high policy limit makes settling these cases difficult,” Gillock said. “Most insurance policies that we run across are 1-3 policies, which means they cover $1 million per incident and $3 million per year. We always are willing to accept that $1 million for cases which are worth much more than that, and I have never chased a doctor’s personal assets. But these are big cases, and you don’t take $1 million when the insurance company has $6 million in coverage.”1 Now here is one of the most experienced med-mal lawyers in one of the most notorious jurisdictions in the country telling everybody exactly what he would do in our hypothetical case: he’d take the $1 million.
- Subrogation of a bad-faith claim: Here’s another possibility: you bring an action against your insurance company—but you don’t actually bring the claim yourself. The plaintiff’s attorney, who up until now has been your mortal enemy, is now your best pal! The plaintiff’s attorney knows that you probably don’t have assets worth chasing (see Gillock quote above), but we all know who does have that kind of scratch: your insurance company. Its obligation is to protect your assets, to settle the case within policy limits, and to avoid exposing you to the possibility of an excess verdict. An insurance company that fails to provide the protection required under the policy can be held liable for “bad faith,” a claim that has the potential to expose the insurance company to punitive damages well in excess of the coverage limits in the policy. You strike an agreement with the plaintiff’s attorney: you give the plaintiff’s attorney your right to bring the bad-faith action against the insurance company (ie, you “subrogate” your right) and, in return, the plaintiff forgives the $4 million excess. You walk away and leave the plaintiff’s attorney and the insurance company to do battle. Can this happen even if you have refused to consent to settlement? Even if the insurance company has been offering, and even recommending, a settlement? Insurance law, especially bad-faith case law, is not intuitive; without getting into citations of case law, the simple answer is yes. Bad-faith actions can still be brought, and can be successful, in those circumstances.
Those are brief descriptions of two of the possible scenarios that begin to play out in the event of an excess verdict. There are others, but it is beyond the scope of this article to describe them all. Their common feature, however, is that none of them end up with the defendant physician’s assets being attached. While the headlines scream about multimillion-dollar verdicts, the actual amount that eventually gets paid is either buried in the back pages or not even newsworthy. The bottom line is that the possibility of having your personal assets attached in the wake of an excess verdict is vanishingly small, certainly less than the chance that you’ll get divorced and end up regretting putting those assets in your spouse’s name!
Dr. Frank is general counsel and director of risk management for Emergency Medicine Physicians (EMP) in Canton, Ohio, in which capacity he manages all EMP legal affairs, including professional liability claims. He is a fellow of the American College of Legal Medicine and life fellow of ACEP. He is a member of numerous medical and legal professional societies.
- Di Edoardo C. Las Vegas surgeon subject of multiple lawsuits. Las Vegas Review-Journal. March 4, 2002.