Should You Have Malpractice Coverage?

Physician's Money Digest, March31 2004, Volume 11, Issue 6

Physicians affectionately call it "self-insuring."Some health care industry experts callit "going bare." Whatever it's called, thebasic idea is that doctors, faced with rocketingmedical malpractice insurance premiums, aregoing without coverage.

Many of the doctors who choose to work withoutmalpractice insurance are in Florida, which has some ofthe nation's highest malpractice premiums. According tostatistics from the Florida Department of Health, 5% ofthe state's 47,700 active physicians are without malpracticeinsurance, up from 4% a year ago. In Dade County,where malpractice premiums are particularly high, asmany as 1250 of the county's nearly 6400 active physicianshave given up their malpractice coverage.

Have a Form of Protection

For many of the physicians who have abandonedtheir malpractice insurance, a prerequisite is a sophisticatedprogram of asset protection that uses trusts, partnerships,and other financial strategies to put assets outof the reach of successful litigants. In Florida, for example,where a doctor's home and often their retirementaccounts are protected by state law from any creditors,it's a relatively simple task to shelter other assets fromadverse malpractice judgments.

When a doctor without insurance gets sued for malpractice,the first call is often to a bankruptcy lawyerrather than a defense attorney. When a doctor declaresbankruptcy, only unprotected assets are available toplaintiffs and their attorneys. In a recent Florida case, apatient won a $4-million judgment against her surgeon,who subsequently filed for bankruptcy. The malpracticeaward was vacated when the courts ruled that virtuallyall of the doctor's $3.8 million in assets were properlysheltered from creditors under Florida state law.

Let Your Patients Know

Going bare may not be an option for many doctors.Although most states don't actually require doctorsto carry malpractice insurance, hospitals andmanaged care insurers generally do. Also, some statesallow doctors to go without insurance only if they arefinancially able to pay at least a certain amount of anyjudgment against them. In Florida, for example, doctorswho can't come up with $250,000 within 30 daysof any malpractice judgment run the risk of losingtheir licenses.

Informing patients about malpractice coverage isalso a ticklish issue. Laws vary from state to state, withFlorida requiring doctors to post a notice in waitingrooms about their decision to go without insurance. Ingeneral, doctors who decide to go bare notify theirpatients of that fact. Some even go as far as to askpatients to sign a waiver promising not to sue, althoughlegal experts say that courts have yet to hear a case thatquestions a doctor's ability to enforce such a waiver.

In the face of what seems to be a growing trend, theAMA has quietly revised its policy on malpractice coverage.Where once it recommended that member physicianshave enough insurance to protect themselves andtheir patients, it now leaves such decisions to the individualdoctors.