What does consent to settle mean and why is it important? First, consider that settlement of medical malpractice claims carries many potential risks:
Beyond that, a settlement will follow a physician for many years and will require disclosure in future insurance applications or in renewal of hospital privileges. It will remain a reminder of the stress and anxiety of a bad outcome.
Now, when physicians are clearly negligent and that negligence causes injury to a patient, then medical malpractice settlements become appropriate. That’s what medical professional liability malpractice insurance is for.
But what about when the physician believes he or she was not negligent, or that any alleged negligence really did not harm the patient? In these cases, the individual making the allegation or claim is known as the claimant, and the physician is the defendant in the legal process. What if there is no desire to settle?
We wrote a definitive guide to the difference between gross negligence and willful misconduct. Do you know what the differences are?
Settlement of a claim against a physician creates many potential consequences. As a result, most insurers write a contractual provision into the policy that only allows the insurer to settle a claim if it has the insured’s, typically written, consent. This provision, often referred to as the insured's approval, gives the insured the right to approve or reject settlement offers before any agreement is finalized.
Many insurers also seek to include additional policy terms in any such consent provision that protects the insurer. Some policies specifically require the insured's consent before any settlement is finalized, ensuring the policyholder maintains control over the outcome. In these cases, the insurer may present a settlement recommendation to the insured, who then has the authority to accept or decline the proposed settlement offer.
Read our blog if you’re asking yourself what the difference between “consent to settle” and “patient informed consent“ is.
Importantly, whether or not you consent to settle a claim is a decision you want to make collaboratively with your malpractice claims consultant, your defense counsel and in some instances, when the exposure realistically exceeds the limits of your insurance coverage, with your personal counsel.
The insurance policy provides cover for certain expenses, damages, or settlement costs, offering financial protection to the insured during settlement and legal proceedings.
There are MPL policies in the market that do not have “pure“ consent to settle provisions. Some require that “consent must not be unreasonably withheld.” Others require a third-party review of consent to settlement, typically appointed by the carrier, to bind the parties.
Others still have various forms of a "hammer clause," which is an additional clause in some insurance policies that modifies the main agreement by imposing extra conditions or obligations on the insured, often involving financial liabilities if they choose to dispute a settlement recommendation.
Those limitations can be onerous if an insured changes their mind, or if there is an adverse finding at trial. This is because, under the hammer clause, if the insured rejects the insurer’s recommendation to settle, they may have to pay any additional damages or costs that exceed the proposed settlement.
When an insured chooses to reject a medical malpractice settlement, the insurer may limit its liability to what the claim could have settled for at the time it first requested consent to settle, leaving the insured responsible for any additional damages if the final judgment exceeds the original settlement offer.
This means the insured could face significant financial risk, including the possibility of judgments that surpass their policy limits, if the case goes to trial and the outcome is worse than the proposed settlement.
Jennifer Wiggins, CEO & Founder at Aegis Malpractice Solutions, provides an excellent summary of this topic and the various “consent to settle” provisions that are out there. Consent to settle is a vital policy provision to understand.
For example, if a physician’s policy does not include a strong consent to settle provision, the insurer could settle a claim without the physician’s agreement. This could result in a settlement being reported to the National Practitioner Data Bank, potentially impacting the physician’s reputation and future insurability, even if the physician wanted to fight the lawsuit and believed they would win.
In 25 years, managing thousands of medical malpractice claims, experience has taught me that it's not just whether you consent to settle but when you consent. When liability and damages are clearly adverse, settlement should always be the goal - the sooner the better.
Often, the best way to optimize an outcome under these circumstances is to settle early before legal expenses of either party begin to accumulate in earnest as a case is prepared for trial.
If there’s a negative expert review or a medical expert who has raised legitimate questions about the standard of care, then although that's not dispositive of itself, it's certainly reason to believe the plaintiff has favorable expert support and will proceed to trial.
At that point, you want to have a comprehensive discussion with defense counsel and your claim consultant to discuss next steps. Often, the best chance to get an optimal settlement in a difficult case is early in the process before the parties incur significant legal expenses.
If you have unreservedly favorable expert reviews on standard of care and causation, then defending the case is generally a strong decision. In my experience, the vast majority of the medical malpractice cases that go to trial, the jury returns a defense verdict in favor of the physician. Moreover, in most medical malpractice claims, the physician prevails, and no loss payment is made on their behalf.
Often in these kinds of cases, the plaintiff's lawyers will seek to distract the defense away from the merits of the claim and create tension, or even conflict between the insurer and the insured by sending out inflated demands and threats to pursue the doctor's personal assets.
These tactics are often designed to frighten the doctor into consenting to settle and to frighten the insurer into making an offer. Under these circumstances, if you are frightened into consent, it is likely that achieving that optimal outcome gets away from you.
I'm not suggesting you should ignore these kinds of letters. Instead, you should consult with your defense counsel, your personal counsel, and your claim consultant under these circumstances. Make sure they work collaboratively together and remain strategic in determining if and when your consent is appropriate.
When facing medical malpractice claims, managing additional defense costs and settlement decisions is a critical concern for both the insured physician and the insurance company. Most professional liability insurance policies include a consent to settle clause, which gives the insured more control over whether a claim is settled. However, these policies can also contain provisions, such as the hammer clause or blackmail settlement clause, that significantly impact the financial consequences of rejecting a proposed settlement.
A hammer clause, found in many liability insurance policies, is designed to limit the insurer’s liability if the insured physician declines a settlement offer recommended by the insurance company. If the insured rejects the proposed settlement amount and the claim later results in a higher judgment or additional costs, the insurer may only be responsible for the original settlement amount, leaving the insured responsible for any excess costs and additional defense costs incurred. This can create substantial financial risk for the insured, especially if the case proceeds to trial and results in a larger award or increased legal costs.
Understanding the details of your insurance policy, including the consent to settle provision, any hammer clause, and other settlement clauses, is essential. Insurance advisors and legal experts can help you navigate these complex provisions, ensuring you are fully aware of the potential risks and benefits associated with each settlement decision. Before accepting or rejecting a settlement offer, it is important to carefully review the proposed settlement amount, consider the likelihood of a favorable trial outcome, and weigh the potential for additional costs if the claim is not resolved.
If the insured physician decides to decline a settlement, most professional liability policies require written consent to proceed with litigation. In some cases, the insurer may impose a full hammer clause, capping their liability at the proposed settlement amount and shifting responsibility for any excess costs to the insured. Additionally, the insurance company may require the insured to participate in mediation, arbitration, or other settlement processes as a condition of continued coverage.
To protect your interests, it is crucial to work closely with experienced insurance advisors and legal experts throughout the settlement process. They can help you understand the implications of each provision in your liability insurance policy and guide you in making informed settlement decisions. By proactively managing your insurance coverage and being fully engaged in the settlement process, you can minimize potential risks, control defense costs, and achieve the best possible outcome for your claim.
Ultimately, the consent to settle clause is a powerful tool that gives insured physicians more control over their professional liability. However, with that control comes the responsibility to understand your policy, anticipate the financial consequences of each decision, and collaborate with your insurance company and advisors to navigate the complexities of medical malpractice claims.
There are circumstances, when the best time to settle might be during a trial, when the evidence has not gone in as expected, or even during jury deliberation while the parties are awaiting a verdict. It's possible a hi-lo agreement might be negotiated that allows you to preserve your right to a defense verdict while capping the upside if the verdict goes against you.
These are all strategies that the defense team and a sophisticated claim consultant will understand. The key is, you want an insurance policy that ultimately allows you, not your insurer, to make that call and a claim consultant who has the level of sophistication to work with you and your defense counsel to get the best outcome. Indigo offers both.
Read our definitive guide to medical malpractice settlements and find answers to your questions right now.
At Indigo, we believe the decision of whether or when to settle a case should ultimately be yours. That’s what we call “defense of good medicine.” The Indigo policy has what's called a "pure" consent to settle provision. Indigo must obtain the written consent of the insured physician before settling any claim.
That consent requirement exists until the insured has had an award or judgment entered against them. No caveats, no limitations, no what-ifs, ands, or buts. It's the doctor’s decision.
It is true that too often, insurance companies are looking for the least expensive way to close a file. Cost of defense settlements are encouraged and those limiting consent to settle provisions are there to protect the insurer if it wants to settle but the policyholder does not.
So, when it comes time to settle or not to settle, make sure your decision is an informed one certainly, but in the interim, look closely at policies that compromise your right to settle or not. "Pure consent to settle" is what every physician should want in their professional liability policy and that's why Indigo has a "consent to settle" provision that protects you, and only you, with none of those annoying caveats.
Indigo is a new innovative medical malpractice insurance carrier for physicians and surgeons that has developed a streamlined AI underwriting process to replace traditional underwriting. This allows us to charge you a premium that is truly reflective of your individual risk. Further, it does so while maintaining that critical "hands on" and personal attention that every claim deserves, if a claim arises.
Visit Indigo to get a quote.
Image by Viorika from iStock.
