How malpractice contract provisions benefit insurance companies over physicians in defense and settlement

The cooperation clause in malpractice insurance contracts allows the insurance carrier to obtain all necessary information to ensure that frivolous claims are not indemnified and meritorious claims are appropriately defended. Lack of cooperation from policyholders can increase the cost of claims and prolong the settlement process. When the cooperation clause is enforced, the insurance company can efficiently settle claims and defend cases in the best interest of the company, rather than the policyholder. Even the attorney retained by the carrier for the policyholder's defense may have a reservation of rights.

Policyholders who fail to cooperate risk forfeiting coverage. If the carrier is unable to obtain accurate information from the policyholder, they may not indemnify the claim and may cancel coverage altogether. Additionally, if a court determines that the policyholder withheld information, they may permit the insurance company to file a breach of contract case against the policyholder. Furthermore, policyholders who are found to be untruthful may incur additional court-related costs and lose their insurance coverage.

The cooperation clause is included in the contract to protect the interests of the insurance carrier, due to an inherent mistrust of policyholder physicians. However, it can also be used to the advantage of physicians by ensuring that they disclose any relevant information when aware of an incident. With an estimated 5% chance of being sued each year, it is important for doctors to be prepared for the possibility of litigation and cooperate with the insurance carrier.

When an adverse outcome occurs, it is important for physicians to promptly report the claim to their insurance carrier with as much detail as possible, including the reasons for their belief that the outcome was due to an error of nature or medical error. This should be done before being served with a lawsuit, as events are still fresh in the doctor's mind and have not been distorted by time. Additionally, the original medical records should be secured in a safe deposit box to protect against accusations of tampering and replaced in the patient's chart with a certified copy for reference.

Once the report is received by the carrier, it is up to the carrier to determine how to respond. The cooperation clause in the insurance contract is designed to enable the carrier to obtain all necessary information to avoid indemnifying frivolous claims or futilely defending meritorious ones. If the adverse outcome is determined to be an error of nature, the carrier has ample time to prepare for any potential lawsuit and creates a paper trail of their response. They may choose to set reserves aside to protect the policyholder's interests or take no action.

Regarding defense and settlement provisions, generally the insurance carrier is required to obtain the policyholder's consent to settle. These provisions also require that the policyholder shall not unreasonably withhold this consent. Once the physician submits a statement as described above, especially when they provide 95 percent confidence that the claim is completely defensible, they satisfy this provision. The insurance company will be reluctant to coerce a settlement when such a statement completely outlines these circumstances, as it may be considered a violation of the policyholder's Seventh Amendment right to have all facts presented, evaluated, and impartially judged at trial by a jury.

When doctors report a claim with a high degree of confidence in their conclusions, issues of transparency are no longer a concern as long as the statements provided by the doctor are truthful. The insurance company can be assured that no vital information is being withheld, and that the doctor is not impeding the efforts to uncover the truth about the claim.

Reporting a claim in this manner is a strong demonstration of a doctor's commitment to fulfilling their obligations under the medical malpractice insurance contract. The cooperation clause requires doctors to assist in the investigation of a claim, and the defense and settlement provisions require mutual consent before a settlement can be reached. It is explicitly stated that claims should be reported when the doctor is aware of them. If a doctor becomes aware of a maloccurrence immediately, even before a lawsuit is filed, there is nothing preventing them from making a report at that time. By adhering to the terms of the medical malpractice insurance contract, doctors can ensure that their actions will not be held against them.