New Jersey appellate ruling adds to physicians' liability worries

New Jersey physicians, already saddled with rising liability insurance premiums, are reeling once again after a state appellate court ruled that plaintiffs can pursue defendants' personal assets in cases where the insurer is in liquidation.

For a state that already is struggling to retain physicians and recruit new ones, word that doctors may have to pay claims out of their own pockets if their insurance company goes bankrupt will likely damage a patient's access to care even further, doctors said.

"It's dismaying that a physician can work his or her entire career to try to make a retirement for themselves, only to lose it all," said George Remisovsky, MD, an obstetrician-gynecologist in solo practice in Union City, N.J. "This will force people out of the state."

If an insurance company goes bankrupt and damages in the case exceed the $300,000 cap allowed by the New Jersey Property-Liability Insurance Guaranty Assn., defendants would be personally responsible for the difference, according to the court ruling in Johnson v. Braddy.

The legislation that established the guaranty fund did not specifically make a defendant immune in situations where his or her insurance company became insolvent, so "it is more reasonable to infer a legislative intent to favor the injured party," the court said.

Although the case involves a personal injury dispute involving a trucking company and its contracted driver, the decision could have far-reaching consequences for doctors, said Bob Conroy, an attorney with Kern Augustine Conroy & Schoppmann P.C., which serves as the Medical Society of New Jersey's general counsel.

"This could have a devastating effect on physicians," he said. "Many physicians would find themselves exposed and their children exposed. They could be faced with possibly finding themselves destitute."

Laws establishing guaranty funds are common across states, though each state's courts can interpret them differently, Conroy said. But there is very little case law on the issue when it comes to medical liability, he said.

Leonard C. Leicht, the attorney who represents the defendants in the Johnson case, filed a motion asking the New Jersey Supreme Court to review the appellate decision. Conroy said MSNJ would support the defendants' side by filing an amicus brief arguing against a plaintiff's ability to target a defendant's personal assets.

Solvency never certain

The ruling is of particular concern to New Jersey physicians because two medical liability insurers in the state have filed for bankruptcy in recent years.

PHICO Insurance Co., a Pennsylvania company that insured many New Jersey physicians, was ordered into liquidation several years ago, and New Jersey-based MIIX Group Inc. recently declared bankruptcy and is on its way to liquidation, Conroy said. In the current liability climate, doctors can never be sure their insurer is going to stay afloat financially, and this decision will have many physicians looking over their shoulders, Conroy said.

New Jersey is one of 20 states the AMA lists in crisis because of rising medical liability insurance premiums. In those states, some physicians are retiring early, while others have been forced to discontinue high-risk procedures or move to states not in crisis.

Dr. Remisovsky said he is seriously considering a move to California, especially after his liability premium increased from $40,000 last year to $79,000 this year. The recent court ruling "is just another straw, but it might be the one that breaks my back," he said.

Steven Reich, MD, a spine surgeon and assistant clinical professor of orthopedic surgery at Robert Wood Johnson Medical School in New Brunswick, N.J., said his attorney suggested he settle a pending case against him based on the appellate court ruling and the mere possibility that his insurance company could go bankrupt.

While he refused to settle, calling his case "completely defensible," Dr. Reich said he has considered retirement rather than risk his family's personal finances in the future.

"I don't know if I can put my family in harm's way," he said.

Protect your assets

Conroy said physicians not only need to consider carefully the insurer's finances, but it's also imperative they protect their personal assets.

Laws on asset protection vary by state, and some physicians take "very exotic" approaches to keeping their personal funds away from litigation, said Steven Enright, a financial planner with Enright, Mollin, Cascio & Ramusevic in Elmhurst, N.Y. Putting your assets in your spouse's name, building more equity in your home or building up a retirement account are a few ways you can at least start protecting yourself, he said.

"For most physicians, you really don't need exotic techniques," he said.