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A Suggestion For Medical Malpractice Insurers

By James M. Beck and Mark Herrmann

Companies that provide medical malpractice insurance tend to be pretty large and pretty sophisticated.

It's thus not surprising that the way they handle most of their business makes a lot of sense to us: They hire lawyers on a "wholesale" basis, asking law firms to defend a high volume of medical malpractice litigation for relatively low rates. The insurers win some cases and lose others, but, overall, the companies presumably maximize their profits by taking this approach.

We don't mean to over-generalize in this next paragraph, but we will: Insurers know what they're getting when they hire lawyers who spend their time trying medical malpractice cases on a high-volume, low-rate basis. Because dispositive motions are rarely available in med mal cases, lawyers who defend those cases typically don't hone their skills in writing dispositive motions. The med mal defense lawyers know a ton of medicine, have a great deal of trial experience, and are good on their feet, but their written work occasionally leaves a little something to be desired.

(We send we were over-generalizing there, but let the nasty comments nonetheless begin.)

Here's our question: Once in a blue moon, an appeal in a med mal case presents an important issue of broad application that will affect the results in many future cases. We're thinking about, for example, issues relating to the information that physicians must disclose in the informed consent process, how statutes of limitations apply, or how courts handle certain aspects of off-label use.

Lose an appeal on the question whether a physician must disclose aspects of his educational background, personal problems, or the like as part of informed consent and many new cases may follow in the wake of the bad precedent. So, too, for a liberal interpretation of the "discovery" of a claim for statute of limitations purposes, or the admissibility of evidence of off-label use to prove the standard of care.

In those types of situations, doesn't it make sense for med mal insurers to retain on appeal lawyers with more expertise writing briefs and framing appellate issues?

If so, why don't insurance companies routinely do that?

We've seen an awful lot of med mal cases where good-on-their-feet-but-not-so-good-on-paper med mal defense trial lawyers briefed and argued appeals, and those appellate results are not always happy ones. Those bad precedents foment more litigation, which costs the med mal insurers a lot of money.

Shouldn't medical malpractice insurance companies have an appellate specialist on staff (or on retainer) to flip through appeals and segregate run-of-the-mill appeals involving discretionary evidentiary rulings (where there's no need to hire appellate counsel) from broadly-applicable-legal-issue appeals that could eliminate a whole area of litigation (where specialized appellate counsel could do a lot of good)?

If that makes economic sense, then why don't the insurance companies do this?

Someone suggested to us that the insurers don't care: If the insurer loses an appeal and ultimately pays out more in claims, the insurer will simply raise its rates and maintain its profitability.

But that can't be right: The law of supply and demand says that, as prices go up, demand goes down. Thus, if insurance companies are forced to raise their rates, they'll sell less insurance. Ultimately, that has to decrease profitability.

Which leaves us with our suggestion: Medical malpractice insurers should try to sort out high-value appeals from the usual chaff (to mix a metaphor) and should retain specialized appellate counsel to increase the chance of success in the appeals that really matter.

Or, if insurers don't do that, they should at least let us know what we're overlooking. We'd be happy to be educated.

Full post as published by Drug and Device Law on May 27, 2009 (boomark / email).