Profession

Florida physician can sue insurer over forced liability settlement

While most states allow doctors to have final say in settlement decisions, it's up to insurers to give them that option, experts say.

By — Posted June 25, 2007

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When the medical liability carrier for Anthony G. Rogers, MD, waited until the last minute to investigate a claim against him, settled the lawsuit and then used it against him to cancel his coverage, the anesthesiologist turned the tables on the insurer and sued.

A panel of Florida's 4th District Court of Appeals recently handed the physician a preliminary victory, saying Dr. Rogers could pursue his lawsuit against Chicago Insurance Co. for allegedly acting in bad faith.

The insurer is appealing the ruling to the full court. If the decision stands, experts say it could serve as an example to doctors who find themselves in similar situations. It is generally up to insurers to decide to give doctors final say in settlement decisions.

"While the insurer must be given wide discretion in investigating a claim and making settlement decisions, it cannot act on its interests alone," the court's unanimous May opinion states.

A unique Florida law bars medical liability carriers from including a policy provision giving doctors veto power over an insurer's decision to settle, known as the consent-to-settle clause. But the law requires insurers to make that call in good faith and in the insured physician's best interest.

"This obligation is solely for the benefit of the insured. If the insured cannot enforce this obligation, then it has no effect at all," Judge Martha C. Warner wrote.

In general, legal experts say it's difficult to bring or prove a bad faith claim against an insurer in Florida and elsewhere, making these types of lawsuits rare. Nevertheless, the conversation over whether to defend or settle a claim can be frustrating for doctors.

"Insurance companies look at these as business decisions, and physicians look at these as personal and professional decisions," said Illinois internist David R. Donnersberger, MD, a lawyer who consults with attorneys in medical liability cases.

It's an especially tough call knowing that settlements and judgments are logged in the National Practitioner Data Bank for state medical boards and hospital privileging committees to see, he added.

Legal pursuit

In Dr. Rogers' case, Florida law gave Chicago Insurance Co. 90 days to investigate the claim against him and decide whether to defend or settle it, but the insurer let the clock tick until 10 days before the deadline. Then the insurer collected medical records only from the plaintiff, not Dr. Rogers, before electing to settle the case in 2002, the court found.

That left Dr. Rogers with a black mark on his record.

"Had they done a competent investigation, they would have concluded this case was defensible. Instead, now it's on his record as having been settled," said Douglas E. Thompson, Dr. Rogers' attorney.

Refusing to renew his policy and forcing him to buy more expensive insurance elsewhere was the last straw for Dr. Rogers, Thompson said.

The doctor is suing for damages to cover those costs, which will follow him every time an insurer pulls his claims history, he said.

Susan Murdy, a spokeswoman for Fireman's Fund Insurance Co., which runs Chicago Insurance Co., declined to comment on the case. The company argued in court papers that the Florida statute does not give doctors the right to sue.

Florida Medical Assn. officials said that two years ago they tried and failed to pass legislation to change the state law. Thompson said the court decision did not alter the statute but clarified that insurers cannot ignore doctors' best interests without consequences.

While most states allow insurers to use consent-to-settle clauses requiring a doctor's approval before settling a case, insurers have discretion as to whether to offer them, said Virginia medical liability defense lawyer Rodney K. Adams. Not all insurance companies include them in policies.

For those that do, Dallas attorney Vernon L. Krueger, who represents physicians in negligence cases, warned that while most consent provisions are doctor-friendly, some carriers might push physicians into settlement by including what is known as a "hammer clause."

Under that provision, if a doctor refuses an insurer's settlement recommendation, he or she is responsible for any excess judgment or settlement beyond the company's initial offer.

C. Scott Nichols, who is also a Texas-based medical liability defense lawyer, added that without the hammer clause, insurers still can pressure doctors with the risk of a paying a jury award above their policy limit if they choose to go to trial rather than settle.

Working with physicians

But insurance carriers are legally bound to work in their insured doctors' best interests, experts say.

Frank B. O'Neil, a spokesman for the national medical liability carrier ProAssurance Corp., said the company reviews each claim individually. But the consent-to-settle provision it employs in its contracts in every state except Florida "solidifies the relationship with the insured because they know you're not going to settle something that they want defended," he said.

When Connecticut ob-gyn Julie S. Flagg, MD, was sued, she found the consent-to-settle clause in her contract with Boston-based insurer ProMutual Group an essential foundation to the conversation over what to do.

"It's a working relationship. We [doctors] say, 'I don't want to go into a court,' but if [ProMutual] had said, 'You have to settle,' I would have been wild," said Dr. Flagg, who went to trial and won the case filed against her.

Eric S. Poe, a lawyer and spokesman for New Jersey physician insurer NJ PURE, said the company stays accountable to its doctors without using consent-to-settle clauses.

"We literally have to make decisions as if we were the doctors themselves" or face getting sued for bad faith, he said, whereas consent clauses essentially take the right to sue for bad faith away from physicians.

Neither ProAssurance nor ProMutual use hammer clauses, company officials said.

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ADDITIONAL INFORMATION

Having a say

Here's what legal experts say doctors can do to ensure they have a voice in medical liability carriers' settlement decisions.

Before signing a policy

  • Find out if there is a consent-to-settle clause or if the insurer can settle a case without your permission.
  • Look for a "hammer clause" that makes you responsible for judgments or settlement amounts beyond the insurer's initial settlement offer.
  • Ask the insurer for its record of cases that go to trial versus settling.

After signing a policy

  • Maintain open communication with the carrier and seek an honest evaluation of the suit.
  • Seek separate legal counsel if a conflict over how to handle a case arises.
  • Check for arbitration requirements that may preclude you from suing the insurer until other avenues are exhausted.
  • Know your state insurance laws regarding fair dealing.

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