Business of Medicine

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Are Frequent Settlements Encouraging More Malpractice Claims?

Executive Summary 

In determining whether to settle or defend a claim, there is much more to consider than may be apparent. The claimant may focus on a quick resolution, understandably so, but there may be further repercussions to settling a case, particularly if the standard of care was upheld. Read on to discover potential impacts of choosing to settle.  

 Recommended Actions 
  • Review your medical malpractice limits to ensure they are optimal based on your risks.  
  • Consider protecting your personal assets and consulting your insurance agent to learn about your options.  

The Impulse to Settle 

When faced with a malpractice claim, it is very common for physicians to feel an initial impulse to settle. Opting for a settlement can feel like a fast, less stressful path to resolution, particularly when litigation is long, costly and accompanied by the pressures of a patient and their attorney. But are settlements in your best interest? 

While settlement may seem like the path of least resistance, the consequences of settling malpractice claims can have lasting effects. It’s important to note that guidance and decisions on whether to defend or settle a claim ultimately rest with the claims team and leadership at medical malpractice insurance carriers. If a policy includes a consent-to-settle provision, the carrier must obtain the policyholder’s consent to settle a claim but does not require the same consent to defend a claim. Medical malpractice carriers take a long-term perspective, recognizing that there are many reasons why settling a claim may not always be the best choice.

The Impacts of Settlement 

In the short term, settling may seem less costly or less arduous, but the impact of that decision extends well beyond the immediate case. Consider the financial cost: if physicians purchased policies that prioritized settlements regardless of claim merit, insurance costs could rise as much as 600 to 800%, potentially making malpractice insurance unaffordable. A recent study focusing on claims that closed with payments revealed that any significant increase in loss cost could lead to a significant increase in premium. 

Frequent settlement of claims, especially those without merit, can have far-reaching implications. When an insurance carrier consistently settles non-meritorious claims, it signals to plaintiff attorneys that a quick payout is likely, encouraging more lawsuits. This trend drives up claim frequency and settlement costs and, ultimately, leads to higher malpractice insurance premiums. As settlements rise, plaintiff attorneys tend to expect even larger payouts, creating a self-perpetuating cycle. More settlements lead to more claims, which drive higher indemnity payments and rising premiums.  

The Importance of Defending Good Medicine 

Perhaps more importantly, defending against non-meritorious claims is fundamentally just for healthcare providers and for society. The filing of a claim does not necessarily indicate a deviation from clinical standards. By settling, a physician may lose the opportunity to clear their name, avoid liability and affirm their commitment to a high standard of care. Blame should not be assumed where it is not warranted.   

Making the right choice between defending or settling a claim is key to protecting a medical provider’s reputation and financial stability. It’s essential that physicians have confidence in their medical professional liability insurer to know which cases warrant settlement and which should be defended. Large insurance carriers, like MagMutual, have the resources to go to trial when appropriate even if this choice is the more expensive option. If the standard of care was met, pursuing a defense in court may be the better option in the long run. 

The Imperative of Strong Strategy  

MagMutual draws on more than 40 years of experience and extensive data to predict lawsuit outcomes and guide policyholders in making informed decisions. This proactive, data-driven approach not only guides individual case decisions but also helps identify broader trends in the malpractice landscape, supporting long-term goals of controlling claim rates and managing premiums.  

Our PolicyOwner-focused claims approach starts with an in-depth review by a team of physicians, clinicians and analysts with expertise in the relevant medical field. Using proprietary predictive claims analysis, the team at MagMutual evaluates each case to determine the likelihood of a successful defense or the advisability of a settlement. Based on this insight, a strategy is tailored to each claim, maximizing the chances of a favorable outcome while ensuring policyholders receive the emotional, financial, legal and logistical support they need. 

MagMutual’s unique Claims Concierge service is available to all policyholders and provides logistical support during the trial phase, which allows our policyholders to focus on what is important. This service covers essentials such as transportation, meals and lodging. Policyholders also benefit from other trial support options, including personal support from our Peer2Peer program. This program matches the policyholder with someone who has undergone similar litigation experiences, benefiting from empathy, first-hand experience and practical advice.  

Most importantly, when facing a potential claim or a certain one, leaning on the expertise of a trusted medical malpractice insurer that prioritizes the policyholder through both rigorous defense and strategic decision-making may be the difference in safeguarding your reputation, financial stability and commitment to high-quality patient care. 

For more information about our claim process, click here.

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Disclaimer

The information provided in this resource does not constitute legal, medical or any other professional advice, nor does it establish a standard of care. This resource has been created as an aid to you in your practice. The ultimate decision on how to use the information provided rests solely with you, the PolicyOwner.