1 Berkley Medical Excess Underwriters ERC ® Hospital Professional Liability: A Most Inhospitable Environment March 12, 2003 Matt Dolan, OneBeacon Insurance Daryl Douglas, GE ERC Sabrina Hart, Zurich North America Robin Maley, Maley Healthcare Strategies Kimberly Willis, Berkley Medical Medical Professional Liability Symposium
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1 Berkley Medical Excess Underwriters ERC ® Hospital Professional Liability: A Most Inhospitable Environment March 12, 2003 Matt Dolan, OneBeacon Insurance.
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1Berkley Medical Excess Underwriters
ERC ®
Hospital Professional Liability: A Most Inhospitable Environment
March 12, 2003
Matt Dolan, OneBeacon InsuranceDaryl Douglas, GE ERC
Sabrina Hart, Zurich North AmericaRobin Maley, Maley Healthcare Strategies
Kimberly Willis, Berkley Medical
Medical Professional Liability Symposium
2
Agenda
Problem: Rising severity
Impact: Carrier results
Response: Reconsider underwriting architecture and risk management culture
3
Problem
Increasing severity of verdicts/settlements
– National and regional data
Trends driving the larger pay-outs
Strategies to reduce loss costs
ERC ®
4
National Medical Malpractice Trends
In 1985, less than 1 out of 100 claims had payment over 1mm as compared to 1 in 8 in 2001 (PIAA 02)
Average jury award tripled between 1994 and 2000, from 1.1mm to 3.49mm (JVR 01)
Median medical malpractice award jumped 43% in one year, 1mm in 2000 from 700m in 1999, and doubled since 95 (JVR 01)
In 1999-2000, 52% of all awards exceeded 1mm as opposed to 34% in 9-96 (Dept. of Health, 7/02)
Increasing Verdict Severity Drives Up Settlement Costs
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100 Largest Verdicts in 2002 – National Law Journal
18 of top 100 verdicts awarded in medical malpractice cases
New York - 6 verdicts
94.5mm (#8), 91mm (#9) and 80mm (#10) - all involving birth related injuries, 2 involving premature babies
NY had sustainable verdict of 28.8mm in 02. On appeal
Texas - 4 verdicts
Pennsylvania - 3 verdicts
Michigan - 2 verdicts
Illinois, Mississippi, and Arkansas - 1 verdict each
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Chicago - 2002 Verdicts and Settlements
$30mm verdict - failure to timely deliver resulting in brain injury
$22.3mm verdict - failure to dx spinal cord impingement of 64 y/m resulting in quadriplegia
$268 million wrongful death verdict in Dallas County in 2000 (settled pre-verdict for app. 2.5mm)
$67.5 million medical malpractice verdict in Dallas in 1999-above the knee amputation of child (settled app. 7mm)
$59 million medical malpractice verdict in Eagle Pass in 2000-impaired newborn (settled app. 30mm)
$40 million medical malpractice verdict in Houston in 2000-negligent credentialing case (reversed on appeal)
$20 million MCO E&O verdict in Corpus ChristiImproper de-selection of provider (settled app. 5mm)
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Large Award Drivers - Sociological Factors
Monetary desensitization - sport/star salaries; lotteries; publication of large verdicts and medical errors
Emboldened plaintiffs’ lawyers - less willing to settle
Managed care backlash - staff reductions; reduced skill levels of providers; disgruntled health care staff
Jurors are experts and have access to more information
Advances in medicine
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Large Award Drivers Medical/Legal Factors
Finger-pointing between doctors and hospital staff
Alleged altered records and late entries
Incomplete, inconsistent and outdated policies
used as a sword by plaintiffs
Lack of documentation
Shifting burden of proof: bad result = negligence
Apparent agency - ED, radiology, anesthesiology
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Survey
Disagree Somewhat
1%Agree
Somewhat20%
Agree Strongly79%
A hospital is responsible for the actions of all medical professionals that practice at the hospital.
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Survey
No28%
Yes72%
A doctor with privileges at a hospital (a doctor not on staff and not receiving salary from the hospital but able to admit patients and practice at the hospital) makes a mistake in treating a patient.
Is the hospital liable for the doctor’s actions?
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So What Can We Do?
Support and lobby for tort reform
Focus on improving patient safety and error reduction
Focus on high risk areas - OB, ED
Hire the most respected and experienced trial lawyers
Cannot afford to defend on the cheap
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Claims and Legal Management of Catastrophic Cases
Spend Money to Save Money - Bob Clifford, Chicago
But (claims specialists) won’t spend the dough. That’s where I’ve got an edge on you. Because my experience is that all these claims people who are watching this thing, they are cheap. They are penny wise and Tom Foolish…. I don’t have a budget on a case….They can … bury me in terms of their financial weight. But not on any one case….. I mean, here, it costs you $10,000 to $20,000 to do a focus group. Most defendants don’t do focus groups. And yet they’ll try the case and get wacked for an extra million bucks. Hello? What am I missing here?
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So What Can We Do?
Utilize jury consultants
Consider effect of settlement amounts driving future costs
Try the right cases
fine line between overpaying and gambling
Push mediation
Hire an experienced and skilled claims staff
Restoration Phase - Return of the Fundamentals
Phase of cycle expected to last well into 2004 - 2005
Economic downturn Financial challenges Massive corporate restructuring Increased monitoring and reporting requirements Human resource dilemmas Safety emphasis Technology advancements Changing role of the Risk Manager