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Do higher policy limits increase the dollar value of a settlement in cases of an indefensible claim?

By Troy Bundy to Medical Malpractice Insurance


In this segment, Healthcare Matters interviews ALL MD attorney Troy Bundy on whether higher limits on a physician's medical malpractice insurance policy increases the dollar value of settlements in cases of an indefensible claim.

Bundy is a hiring partner at Hart Wagner LLP in Portland, Ore., where he defends healthcare professionals against claims of malpractice, cyber-liability, HIPAA and DEA investigations, health-related business formation and contract resolution, licensing board matters, billing disputes and privileging issues.

Bundy is a charter member of the Association of Liability Lawyers in Medical Defense (ALL MD), a nationwide organization that connects healthcare providers with attorneys who specialize in medical malpractice defense.

Question 3 of 5

Interview was recorded October 14, 2015


Mike Matray: Hello and welcome to Healthcare Matters, where the medical and legal communities come together to discuss healthcare matters. I’m your host, Mike Matray and today’s guest is Troy Bundy. Mr. Bundy is a hiring partner at Hart and Wagner in Portland, Oregon where he has been defending healthcare professionals since he joined the firm in 1996. Welcome to the show, Troy.

Troy Bundy: Thanks, good to be here.

Mike: In your professional experience, do higher limits on a physician’s medical malpractice insurance increase the dollar value of settlements in cases of an indefensible claim? In other words, can a physician or entity be over-insured? And conversely, can a case be made that the lower the limit, the lower the risk of exposure?

Troy: Yeah. You know, I’ve dealt with that issue recently and I understand the thought process of wanting to potentially lower exposure by lowering limits, but I don’t agree with it. I think it’s a dangerous practice to be honest with you. You better make sure that there is no ability to pierce the veil and go after personal assets because in some instances, you may have a situation where you only carry, for instance, a million dollars in coverage, yet you’re dealing with high-risk patients and you don’t want to get that extra umbrella or you don’t want to go to a three-five policy or something like that. I don’t think it has any impact, to be honest with you, whether or not you have less limits available to a plaintiff’s attorney. In some instances, and this is one of the points I discussed with some of my clients, you may have a defensible case, but the exposure is high and well-above limits. So, there is more of a likelihood that you would settle a defensible case because of the excess of exposure issue, which then can result in additional premiums having been paid because you’ve been settling cases.

I do think, to a certain degree, the nature of the practice is important to consider. If you’re running an OB clinic or if you are taking care of high-risk pregnancies versus a stand-alone primary care clinic, there may be something to it, but there is no universal answer. I liken it to, yeah, you can ride your motorcycle without a helmet, but if you get into a wreck, you might want to have a helmet on. Quite frankly, I haven’t seen any evidence to suggest that because there are lower limits, you are less likely to be sued or less likely to get out of a lawsuit. Quite to the contrary, if you have lower limits, it’s just like anything else. If you have a high dollar value case and the risk…when we evaluate a lawsuit, we are always asked about defensibility. It’s never about, “Well, what about the fact that there are very little limits?”

When there are very little limits, it raises a number of issues. Let’s talk about, for instance, a clinic that decides to carry a one million dollar of limit policy, but yet, routinely sees lawsuits that are brought against it far in excess of one million dollars. The assets of the clinic are still at risk. Just because you only have a million dollars in coverage, that doesn’t mean that the clinic is safe and it only has a million dollars’ worth of exposure. The assets of the clinic can be leaned against. The assets of the clinic can be collected and the clinic can be closed as a result of a loss because you were underinsured or any number of things, but the fact is that if you have a corporate structure, a clinic that you are trying to protect, you want to make sure that it is adequately protected. Carrying limits that are not enough or that are very low to dissuade lawyers from suing you, is not going to work.

There is always a lawyer out there who is willing to sue and collect money. My advice is to always make sure you have claim insurance. In the event that we have, a catastrophic loss or a big problem with a lawsuit that necessitates a big payout, we will have that money available. Because the fact is with most lawsuits, if you have a one million with a three million umbrella, or a three million with a five million umbrella or whatever the case may be, if you have enough adequate coverage, we will be able to either defend the case 100% to its conclusion if it’s a defensible case or we will be able to negotiate a settlement well within the policy limits so that you can keep your corporation, keep your clinic active. Leaving yourself out to dry in hopes that, “Well, they won’t chase after me because I don’t have a lot of insurance” is not a well thought out business plan, in my view.