What’s in an allocation?
Liability allocations are an integral part of multiparty medical malpractice claims, said Brian Atchinson, president and CEO for the Medical Professional Liability Association, a trade association for medical liability insurers.
“In any case involving more than one party, there is a potential allocation issue,” Mr. Atchinson said in an interview. “[Insurers] generally look to the liability and damages incurred with regard to their respective insureds in a case and work to establish an allocation that reflects actual liability.”
If the case goes to a jury and jurors find for the plaintiff, depending on the nature of the damages awarded, the jury may be called on to allocate liability among multiple defendants, he said.
Because settlements are reported to the National Practitioner Data Bank (NPDB), the proportion of liability assigned to each defendant has significance, said J. Richard Moore, a medical liability defense attorney based in Indianapolis and chair for the Defense Research Institute’s Medical Liability and Health Care Law Committee.
“The allocation matters because the amount of settlement matters,” Mr. Moore said. “A lower settlement amount suggests the physician’s insurance company made a cost-benefit business decision to end litigation without more expense, while an extremely high settlement suggests actual malpractice.”
State medical boards have varying reporting requirements. Some state boards require both the amount paid by the individual provider and the global settlement amount – if known – while other state boards require only the amount paid on behalf of the provider.
Conflicts over allocations are not common, Dr. Segal said. More frequent are disputes among physicians and insurers over the potential settling of a claim. Such conflicts underscore the importance of paying close attention to contract language when signing with an insurer, Dr. Segal said.
Whether the contract includes a consent to settle clause, for example, can markedly change the case outcome. The clause means the insurer must have the doctor’s approval to settle the case. Absent the clause, insurers generally have authority to settle all claims arising under the policy.
Other contracts may include a “hammer clause,” Dr. Segal notes. This gives doctors the ultimate vote on settling, but it stipulates that if the physician refuses a settlement offer and opts for trial, the doctor is responsible for any surplus award, should the doctor lose.
In Dr. Minkina’s case, the doctor’s contract allowed ProMutual to settle without her consent, but the contract was silent on allocations.
Dr. Segal and Mr. Moore both said the odds of Dr. Minkina prevailing are fairly low. In another case, a South Carolina doctor similarly sued the South Carolina Medical Malpractice Liability Joint Underwriting Association over an allocation of liability following a settlement. The doctor claimed he should not be assigned any portion of the $500,000 settlement, and he sued after his insurer assigned him one-seventh liability.
A trial court found in his favor, ruling the insurer breached the covenant of good faith and fair dealing by failing to treat each physician equally when determining liability. The Supreme Court of South Carolina in 2001 overturned that decision, finding the evidence did not support a bad faith finding and that the insurer’s allocation decision was reasonable.
If the Massachusetts case ends in Dr. Minkina’s favor, it will be as a result of strong evidence that the insurer placed its interests ahead of the physician’s financial and other interests, Mr. Moore said.
“If that happens, I anticipate that insurers may revise their standard policy provisions to clarify and limit the extent to which physicians have the right to be involved in allocation decisions,” he said.