Business

Ways to reduce your personal liability

A column examining the ins and outs of contract issues

By Steven M. Harrisis a partner at McDonald Hopkins in Chicago concentrating on health care law and co-author of Medical Practice Divorce. He writes the "Contract Language" column. Posted Feb. 2, 2004.

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

When reviewing a contract or loan document, make sure you check to see what your personal liability is if the deal goes south. Most loans and leases are structured as joint and several among all partners, which can be costly. Here are some key points.

Joint and several liability holds each party to the contract, loan or lease responsible for the entire debt. If the practice defaults, the bank or landlord may collect all amounts due from one partner, even if that person is no longer with the practice.

Negotiate for several liability, under which each physician agrees to be liable for a pro rata share of the loan.

Settlement agreements among the partners often state that former partners shall be indemnified against financial exposure in connection with a lease or bank note. However, that promise is only as good as the practice's continued creditworthiness. The third party can seek payment from a former partner, who in turn has the right to seek reimbursement from the other contract signers.

As part of any termination, it is important all departing partners review every obligation of the practice that may result in joint and several personal liability.

Indemnification clauses can result in you or your practice being responsible for acts outside your control. The following is an example of a broad indemnification clause:

"Physician agrees to indemnify and hold payer, its employees, agents and contracting parties (the "Indemnified Parties") harmless from any and all liability, loss, damage, claims, fines or expenses, including costs and attorneys' fees (or upon the option of the Indemnified Party, Physician shall provide a defense to the Indemnified Party), which result from the alleged or actual negligence, or intentional acts (including but not limited to criminal conduct, fraud, defamation and violation of any individual's right to privacy) of payer or any Indemnified Parties in performance of this agreement including losses due solely to the acts or omissions of any Indemnified Parties."

While many states may not enforce this provision to protect the payer against its own criminal or intentional conduct, a limited indemnification provision is safer.

An example: "Physician shall hold harmless and indemnify payer for any and all third-party costs, losses, expenses, awards or fees that payer incurs due solely to the acts or omissions of the Physician for the medical care of an enrolled patient."

Each party to a contract also should seek indemnification from the other's acts. This can be handled by including a mutual or reciprocal indemnification provision, such as: "Each party agrees to indemnify and hold harmless the other party and its officers, employees and agents from and against all fines, claims, demands, suits, actions, or costs, including reasonable attorneys' fees, of any kind and nature to the extent they arise by reason of the indemnitor's acts or omissions."

To reduce personal liability, weed out all joint and several liability provisions and negotiate for several liability before signing any contract, loan or lease. Also, make sure executed settlement agreements include releases from prior obligations and eliminate broad indemnification provisions.

Steven M. Harris is a partner at McDonald Hopkins in Chicago concentrating on health care law and co-author of Medical Practice Divorce. He writes the "Contract Language" column.

Back to top


ADVERTISEMENT

ADVERTISE HERE


Featured
Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story


Read story

Goodbye

American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story


Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story


Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story


Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story


Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story


Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story


Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn