How to Protect Your Organization From Excess Malpractice Verdicts

November 5, 2021
Excess malpractice verdicts on the rise

A 40-year-old woman was evaluated in the emergency department (ED) of her local hospital for abdominal pain. She underwent an abdominal CT scan during which she had a reaction to the contrast dye and died as a result. Her family filed a wrongful death malpractice lawsuit against the hospital alleging that the ED physician did not administer Epinephrine in a timely manner, thereby leading to her death.

After an expert review of the case determined that the ED physician did not meet the standard of care, Constellation valued the lawsuit at approximately $2.5M. The plaintiff’s (family) attorney initially made a demand of $21M (the reported policy limits of the defendant ED physician). The demand was based almost entirely on non-economic damages as the value of the economic damages was estimated to be less than $1M.

Prior to the expiration of the initial demand, the defense attorney amended discovery responses to show that the ED physician’s coverage was actually $37M. That same day, the plaintiff rescinded their demand and made a “full policy limits demand” of $37M. Although the defense attorney engaged in settlement discussions, a resolution could not be reached.

The case proceeded to a trial by jury and a plaintiff verdict was returned in the sum of $29.5M. Settlement negotiations were conducted post-trial and a settlement was ultimately reached in the amount of $15M.

Recent years have shown an increase in large medical professional liability (malpractice) judgments (verdicts) across the country. In addition, plaintiff settlement demands are on the rise—often driven by the limits of liability carried by the defendant instead of patient/resident injuries.

Based on research by Transatlantic Reinsurance Company (TransRe), 2019 set a record for verdicts of $10M or more at 50. Although the verdict amount rarely equals the ultimate indemnity payment, jury verdicts can influence jury perception. Verdicts are a barometer that plaintiff and defense counsel utilize to determine if their respective theories of liability, causation and damages resonate with a jury or judge. As such, paying attention to jury verdicts is important.

Policy limits can drive large settlement demands

Purchasing sufficient limits of liability within an insurance program is important. As with all medical malpractice cases, insurance policy limits are discoverable within the claim process.  However, the amount of limits purchased can often become a target for plaintiff attorneys, who become focused on policy limits instead of patient/resident injuries. In this case, the demand went from $21M to $37M based on the plaintiff attorney’s knowledge of available insurance coverage. This is an example of how policy limits drive settlement demands.

Constellation’s XJL Coverage

In response to market conditions, Constellation developed Excess Judgment Liability (XJL)—insurance coverage that will apply in excess of other professional liability insurance purchased through a Constellation company. In order to access this coverage, a judgment must be awarded through a jury verdict or binding arbitration. Limits of liability purchased under XJL coverage are protected from settlement demands that are superficially inflated in order to access excess policy limits.

XJL coverage can protect your organization financially

The benefits of adding XJL coverage include:

  • Limits of liability purchased under XJL coverage are protected from settlement demands that are superficially inflated in order to access policy limits.
  • The cost to purchase XJL coverage is typically less than traditional excess coverage, because limits are not available for settlement demands.   
  • Limits are protected for court cases with high verdict values.

With the rise of excess verdicts, it could be a good time to have a discussion with your agent or broker about how to best structure policy limits in order to protect your organization.

Constellation® is a trademark of Constellation, Inc.

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