How Liability Coverage Structure Impacts a Malpractice Claim Settlement

May 22, 2023
The impact of verdict protection coverage through Excess Judgment Liability

A hypothetical case study:
A gastroenterologist performs a routine colonoscopy on a 50-year-old man and inadvertently perforates the patient’s bowel. A colorectal surgeon is consulted and performs an anastomosis to repair the perforation. Due to the patient’s medical history, his recovery is lengthy and rocky. After about 18 months and additional surgery, the man finally recovers. Unhappy with the complication and prolonged recovery, he retains an attorney and files a malpractice claim against the gastroenterologist, alleging improper performance of a procedure
.

This is a hypothetical but common scenario after an adverse event—an injured patient seeking compensation for injuries that result from medical care. How might the resolution of this case play out differently with traditional medical professional liability limits (MPL) compared to a coverage structure that includes Excess Judgment Liability?

Getting to resolution: Traditional MPL coverage alone versus a policy with verdict protection coverage

Excess Judgment Liability is insurance coverage that applies in excess of other MPL insurance purchased through a Constellation company. To access this excess coverage, a judgment must be awarded through a jury verdict or binding arbitration. Limits of liability purchased under Excess Judgment Liability coverage are not available for settlement demands unless there is a final award.

Let’s compare two possible resolution scenarios:

Scenario #1: Physician policy featuring $1M primary coverage + $2M traditional excess coverage

Coverage available: In this scenario, there is $3M total MPL coverage. Since both layers are traditional coverage, the entire limit of $3M is available for both settlement and jury awards.

Our assessment: Our experts value the case at $900,000.

The chain of events: At the settlement conference, the plaintiff’s counsel (representing the patient) is aware that a $3M pool is accessible for settlement. The initial demand is $3M. Constellation’s team shares our expert review resulting in our $900,000 value assessment. We attempt to negotiate; however, the delta is too large, and discussions stall.

Resolution: The plaintiff’s counsel, aware of our nearly 90% trial win rate, is reluctant to take the case forward to trial but is also hesitant to settle far below policy limits. Negotiations drag out for several months. After six months of discussions, a settlement agreement of $1M is reached.

These example scenarios illustrate how verdict protection coverage with Excess Judgment Liability can aid faster case resolution and allow all involved to move forward sooner.

Scenario #2: Physician policy featuring $1M primary coverage + $2M Excess Judgment Liability

Coverage available: In this scenario, there is $3M total MPL coverage. Since the excess layer is Excess Judgment Liability, only the primary layer of $1M is available for settlement. The additional $2M of coverage is only accessible in the event of a jury verdict or binding arbitration.

Our assessment: Our experts value the case at $900,000.

The chain of events: At the settlement conference, the plaintiff’s counsel is aware that a $1M pool is accessible for settlement and the $2M available only with a final judgment. Constellation’s team shares our expert review resulting in our $900,000 value assessment.

Resolution: The plaintiff’s counsel, aware of our nearly 90% trial win rate, is reluctant to take the case forward to trial and amenable to the value discussed. After three weeks of discussions, a settlement agreement of $900,000 is reached.

Benefits to our clients:
Case resolved eight times faster than without Excess Judgment Liability coverage.
Fair compensation for patient injury (not inflated).
Reduced anxiety and stress for clinicians so they can continue providing excellent care.
Reasonable premium purchased for excess coverage. Excess Judgment Liability is typically 23-35% less expensive than traditional excess limits.

Policy limits can drive large settlement demands

Purchasing sufficient limits of liability within MPL insurance coverage is important, and plaintiffs are entitled to know of all limits applicable to their claim. However, the dollar amount of limits purchased can often become a target for plaintiff attorneys, who become focused on policy limits instead of the true value of patient injuries.

Verdict protection coverage through Constellation’s Excess Judgment Liability is not only about verdicts. It also supports fast and fair resolution after harm events. This means more peace of mind for clinicians, less time away from work and reduced stress when adverse outcomes do occur.

Constellation’s verdict protection coverage with Excess Judgment Liability

Health care organizations can use verdict protection coverage through an Excess Judgment Liability policy to:

  • Purchase reasonable primary limits: The risk of a large jury award has caused health care leaders to increase their primary malpractice limits, which, in turn, can inadvertently invite even higher demands. Excess Judgment Liability coverage protects health care teams from inflated and unsubstantiated settlement demands.
  • Continue providing excellent care after an adverse outcome: When health care professionals carry a reasonable primary limit, settlement discussions are more likely to proceed quickly and fairly .

With the rise of excess verdicts and inflated settlement demands, now is a good time to have a discussion with your agent, broker or Constellation business development consultant about how to best structure policy limits to protect your organization and care teams.

Whether a harm event is resolved through a settlement or goes to trial, Constellation is in your corner and will defend your good medicine.

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