Consent Provisions in Professional Liability Insurance Policies

Last Friday a Memphis jury awarded almost $24M to a woman and her husband in a civil suit arising out of what the jury found to be medical negligence arising from the  failure to promptly diagnose breast cancer.  The woman is in the last weeks of her shortened life.

It is my understanding that the defendant did not make a settlement offer and in fact that  the doctor refused to authorize any offer.  I do not know if this is correct.  I do not know if the case could have been settled.  I do know it  is hard to make progress on settlement negotiations if one side or the other refuses to discuss settlement.

Many insurance companies that provide professional liability coverage to physicians give the physician the right to refuse to consent to any settlement.  This is unlike traditional liability insurance coverage, where the insured may be given the opportunity to voice an opinion on settlement but rarely has any power to block a settlement within policy limits.

On the one hand, consent provisions are a good marketing tool.  They empower doctors, making them feel like they have a right to control their own destiny in litigation.  The major carriers in Tennessee all seem to have such a provision in their policies.

On the hand, consent provisions subject the assets of the insurer (and re-insurer) to the whim of a doctor who may permit ego to interfere with sound judgment.  They also drive up defense costs.

Lawyers who defend medical malpractice cases have  told me on multiple occasions that they have recommended settlement of a particular case but the doctor refused to consent.  It certainly seems to me that a good medical malpractice defense lawyer is in a better position to evaluate facts under existing law and determine what a jury is probably going to do than (what I hope would be) an infrequent litigant, even one who is intelligent and wears a white coat.  I  have a reasonable level of intelligence and education and have been doing medical-related work for 28 years, but I can tell you with 100% confidence that you want a well-trained oncologist (and not me) working you up for symptoms that are consistent with cancer. One would like to think that doctors would have a similar view of the work of lawyers.

To be sure,  professional liability insurers can write consent provisions into their policies if they want to do so.  Indeed, the market probably demands that they do so.  And,  the negative aspects of these provisions are not causing the world to come to an end, as evidenced by my articles this week on SVMIC’s financial condition. See posts herehere and here.

But the fact of the matter is that use of consent provisions have consequences, and one of those consequences is that from time to time a case that could have been settled and, from an objective standpoint, should have been settled will not be settled.  This can happen because the physician received poor advice from the lawyer for the defense or the case was not properly evaluated by the claims personnel, and of course this can happen in any case for any company, regardless of whether there is a consent provision in the policy.  The added risk of a consent provision  is that even if the defense  lawyer and the claims rep do exactly what they should do and communicate those evaluations to a doctor in language the doctor can understand  the doctor can refuse to accept their opinion and "just say no."  An unreasonable "no" has consequences for the company and, if it is a mutual insurer, every policyholder in the company.  Indeed, in a "small" mutual company a single unreasonable insured can have a significant impact on re-insurance rates (because a large, adverse hit that would not have occurred had the case that should have been settled actually been settled can impact the view of re-insurers and thus the cost of re-insurance).

Am I complaining about consent provisions in professional liability policies?  No.   Insurers have a right to do what they want to do in this regard and can yield to the demands of the marketplace if they think that is in their long term best interest.  There is a price for doing so, and it may have played a role in what just happened in Memphis.  As my wife would say, when that happens the insurance company and its policyholders  just have to "put on [their] big girl panties and get over it."  It is a cost of the business model.

I will conclude with this recommendation:  Dr. Defendant, if you are being represented by a lawyer you have confidence in and she recommends that a case be settled, you should accept her advice and permit a reasonable effort to do so.  If you have confidence in the lawyer but feel uncomfortable with the advice, get a seond opinion.  If you don’t have confidence in ;your  lawyer, fire her and get another one.  A doctor (indeed, any professional) who tries  to evaluate the merits of his or her own case faces a real struggle clouded by lack of knowledge and lack of objectivity.

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