Insurer insolvency may put docs on hook for malpractice payouts

Associated Press

TRENTON, N.J. (AP) _ Dozens of New Jersey doctors could soon be personally liable for settlement payouts now that state officials have declared insolvent what once was the state’s largest malpractice insurance company.

The insurer, Medical Inter-Insurance Exchange, has been in bankruptcy for six years. A liquidation hearing was set for April 9 in Superior Court in Mercer County after the state Department of Banking and Insurance moved to sell off the remaining assets of the 31-year-old insurance business. 

With the shutdown looming, about 400 malpractice cases _ 236 of them involving New Jersey doctors _ are still unresolved, although the doctors involved will have backup insurance of $300,000 from the New Jersey Property-Liability Insurance Guaranty Association. Regulators expect to settle about 100 of those cases, but nearly half likely will have payouts exceeding $300,000, Jaimie Gilmartin, an insurance department spokesman, told The Star-Ledger of Newark for Wednesday’s editions.

Doctors would have to pay the difference, based on a 2006 Supreme Court ruling.

“It’s clearly a problem that we don’t want to see physicians facing, especially since they purchased insurance and did the right thing,” said Lawrence Downs, general counsel for the Medical Society of New Jersey.

Still, Downs and state regulators said they are relieved more doctors aren’t being affected.

The insurer stopped writing new policies in 2002 and came under state supervision. It has since wrapped up more than 3,000 cases, Gilmartin said, some with large payments and some with no payout.

The chairman of the Assembly Financial Institutions and Insurance Committee, Assemblyman Neil Cohen, said he plans within weeks to introduce legislation that would boost protection for doctors if their insurers go broke.

“We need to take quick steps to remedy this,” said Cohen, D-Union. “Physicians should not have their personal assets at risk.”


On the Net:

Department of Banking and Insurance site:


Information from: The Star-Ledger,

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