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Mitigate the risk of excess judgment in malpractice litigation
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In medical malpractice litigation, the usual judicial remedy sought by the plaintiff consists of monetary damages. Indeed, one goal of the civil judicial system is proper compensation for the wrong inflicted by one party upon the other. The easiest method to measure such compensation is by financial award, determined by the court or by jury verdict, with input from experts in accounting, economics and related professionals.
The purpose of medical malpractice insurance is for the physician or other medical defendant to be able to pay monetary restitution to the plaintiff, in the event of a successful settlement offer, or for a court judgment that is adverse to the defendant. Many medical malpractice insurance policies provide coverage up to about $1 million per event.
In this article, we examine a situation in which the plaintiff’s verdict might exceed the liability insurance policy limit. While this is an unusual scenario, and most medical malpractice litigation is settled out of court within insurance policy limits, the case offers some valuable insights.
B. Sonny Bal
Lawrence H. Brenner
Downs v. Trias
Allison Downs had an extensive history of breast cancer; her mother, maternal grandmother, and two maternal aunts died from the disease. At 22 years old, Downs made the decision in 1981 to have bilateral, prophylactic mastectomy, even though she had not been diagnosed with cancer. Then in 2005, she underwent an elective partial hysterectomy for uterine fibroids, a non-cancerous condition. Her gynecologist, Orlito A. Trias, MD, had a discussion with Downs and explained that he would not remove her ovaries because there was no evidence of increased risk of ovarian cancer, absent genetic testing which Downs had not undergone. Whether Trias recommended genetic testing for increased risk of ovarian cancer was not in dispute, and therefore, not a part of this litigation.
One year after the uneventful hysterectomy, Downs was diagnosed with late-stage, terminal, ovarian cancer that had spread to the abdomen. The facts were clear that at the time of the hysterectomy 1 year earlier, Downs did not have ovarian cancer. The facts were also clear that had the ovaries been removed at that time, she could not have developed ovarian cancer.
Downs alleged that her ovarian cancer and related injuries were caused by the defendant gynecologist’s negligence. Specific allegations that were supported by defense expert testimony included failure to advise Downs strongly enough to have her ovaries removed during the hysterectomy, and failure to instruct the plantiff that her family history greatly increased her risk of developing ovarian cancer.
Of note, the defendant was said to have asked his malpractice carrier to settle the case for his $1 million medical malpractice insurance policy limit, but the company refused. Whether this settlement offer was known to the plaintiff, who chose to turn it down, is unknown. Ultimately, the case went to trial.
In trial court, the jury returned a verdict in favor of the plaintiff, awarding her $4 million in damages. From this judgment, an appeal followed to the Connecticut Supreme Court, where the defendant raised a long list of grievances, challenging the trial court’s admission of expert witness testimony against him, and raising several other defenses. In mid-2012, in a written opinion, the Connecticut Supreme Court affirmed the decision of the trial court against Trias.
This case received considerable coverage by the press because in May 2013, the plaintiff’s law firm, Silver, Golub and Teitell, executed on the judgment, seized the gynecologist’s personal and business bank accounts, and placed a lien on his property in an effort to collect the $4 million owed under the judgment. The outcome of this asset attachment move is unknown and may be complicated by a legal cross-claim that the defendant may have against the malpractice insurance carrier, who allegedly refused the settlement offer brought up by the defendant. It is also unknown, but possible, that the plaintiff would not accept the settlement offer of the $1 million policy limit. Despite these uncertainties, this case offers useful insights and lessons.
Discussion
Review of the factual information and legal opinion in this case suggests that the defendant had a narrow chance of prevailing at trial. Expert testimony for the plaintiff was strong and clarified that the standard of care in this dispute called for the defendant to advise removal of the ovaries at the time of the hysterectomy, because the patient’s family history contributed to an increased risk of ovarian cancer.
Some physicians familiar with this case were outraged and mistakenly believed that the plaintiff’s attorneys could not attach the personal assets of a defendant. Under prevailing Connecticut law, however, the attachment of personal assets and seizure of bank accounts to satisfy a judicial verdict in excess of policy limits is legal and can be done without warning. Also, in states such as Connecticut that have not legislated any caps on medical malpractice damages, verdicts in excess of insurance policy limits are possible.
Practical lessons
One lesson from this case is that physicians should be familiar with their state laws about medical malpractice litigation, excessive verdicts, limits on malpractice damages and permissible asset protection strategies. Setting aside time to meet with legal counsel and becoming familiar with these considerations at the beginning of one’s practice years, may prove to be a useful exercise.
Celebrities, for example, have managed to put legal structures in place over several years that were designed to insulate their considerable monetary fortunes. Legal experts agree, however, that asset protection is not a simple matter, and there is no such thing as an impregnable asset protection tool that can completely insulate financial assets from potential creditors. Instead, asset protection is best thought of in terms of strategic thinking, anticipation and planning to mitigate risk. Thus, there is sound business, estate and financial planning for one’s career, and a desirable by-product of such may be relative insulation of one’s wealth and assets from potential creditors.
Asset protection
Properly structured asset protection mechanisms can be envisioned like an obstacle course. Each obstacle can be overcome by a potential creditor, but each will cost the creditor a discouraging amount of money. That is when the potential creditor will return to settlement discussions instead. Asset protection serves as a shield, not only for the super-rich, but it also reflects thoughtful planning for professionals who are well-off, such as attorneys, physicians and other professionals who may be at risk of being sued.
A thorough evaluation of one’s insurance coverage is the obvious first level of protection. Beyond the homeowners’ policy for example, an umbrella policy can limit liability against unexpected occurrences, such as a personal injury in your home or an accident in your car driven by your child. Some state laws also offer asset protection; Florida and Texas have homestead laws that allow primary residences to be excluded from lawsuits. Other states have laws to protect the equity in a jointly owned home in case one spouse is sued. In other states, retirement assets and accounts may also be protected from creditors. Setting up financial assets in appropriate trust structures for the benefit of heirs also has the desirable side effect of protecting assets in the trust, subject to various rules, laws and related nuances. In special situations, for individuals of high net worth, an offshore trust that takes certain assets out of the reach of creditors in the United States might make sense.
Protection of financial assets is a complex matter, and well beyond the limits of this article. Only general guidelines can be offered. However, as the Connecticut case illustrates, physicians are at financial risk because of the possibility for medical malpractice lawsuits. Timely consultation with a high-quality law firm, and investing time and resources in creating appropriate structures targeted at one’s long-term financial protection are prudent moves for any careful and diligent physician. With the input of legal counsel, forward thinking, anticipation and planning to mitigate the risk of financial disaster, physicians can be free to focus on their medical practices and enjoy family and recreational activities.
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Disclosures: Bal and Brenner have no relevant financial disclosures.