Awarded Medical Malpractice Damage? Where Does the Money Come From

Even the best doctors make mistakes. Sometimes you might find yourself suing your doctor, but feel guilty about pursuing the claim because you don’t want to risk driving them out of business. Here’s where medical malpractice damage money comes from.

How Medical Malpractice Damage Works

There are three kinds of damages available in these cases: general, special, and punitive. General damages are things that don’t have a quantifiable expense, special damages are loss of income, medical bills, and other such expenses. Punitive damages are rarely awarded and only in cases where the doctor has caused problems intentionally. For example, when one tries to get more money out of the patient.

In many states, damages are capped, sometimes on all damages and sometimes only on “general damages”. Also, the award reduces by the amount you get from your insurance.

Caps can be as high as $1 million, which is still a lot of money, and more than most people can manage without going bankrupt. So, how do doctors and hospitals pay this?

Your Doctor Has Insurance

In most states, medical providers are legally required to have medical malpractice insurance. Even in states where they are not, given most American doctors face at least one suit during their careers, the insurance is an essential business expense. Private practice doctors purchase their policies from traditional insurers or through a medical risk retention group. This is essentially a bunch of doctors banding together to get a better price.  

Many medical malpractice insurance companies are, in fact, physician-owned, which doctors consider to be beneficial because of the direct participation of doctors in risk and claim decisions. Hospitals also carry malpractice insurance that covers their employees. Some large hospital systems have self-insurance or have “captive insurance”, where they own their medical malpractice insurer.

Doctors are covered as individuals, while practices and clinics are covered as businesses (ensuring that physician assistants and nurses are also covered).

This means that when you sue a doctor or hospital for malpractice, their insurance steps in.

What Does Medical Malpractice Damage Insurance Cover?

Malpractice insurance (also called medical professional liability insurance) covers your doctor’s basic legal costs. This includes their legal fees, court costs, any costs of arbitration, and, of course, the damages themselves. This does include punitive damages. It also covers the doctor for property damage.

Times without coverage:

• Sexual misconduct.
• Criminal acts. This means some punitive damage claims may not be paid if the court determines the doctor is breaking the law.
• Alteration of medical records. This refers to deliberate alteration, rather than mistakes.

Some malpractice policies also cover regulatory compliance and cyber liability (that is to say if somebody hacks into their office and steals your medical records). Some doctors have separate insurance, especially as hackers target healthcare companies.

Malpractice insurance generally has a deductible, which your doctor will have to pay, and some kind of annual cap. It’s rare for a single incident to go over the annual cap. Obstetricians face the highest risk of this, and as a result generally pay the highest premiums for a higher cap.

Your doctor is the one who has to worry about coverage, not you, but in the vast majority of cases, your doctor’s insurance company will cover the claim.

What Are Patient Compensation Funds for Medical Malpractice Damage?

In a few states, there’s a different answer as to who pays. In fact, that’s the state’s patient compensation fund or excess recovery fund. Further, in a few states, there are also no-fault compensation funds for specific conditions. However, most focus on birth injuries and defects. The idea behind the patient compensation fund is to keep premiums low by encouraging a lower cap on damages. The fund pays anything over the cap.

This is one answer to spiraling liability insurance costs for physicians. If this is the case in your state, you will essentially have to pursue a second case against the fund; talk to your lawyer about this. In general, this will only happen if you are pursuing a larger award for a more serious condition. For more minor cases, you probably don’t have to worry about it. The states that have these funds are Indiana, Kansas, Louisiana, Nebraska, New Mexico, Pennsylvania, South Carolina, and Wisconsin. Wisconsin requires that doctors participate in the fund.

Isn’t This Insurance Hideously Expensive?

You might feel sorry for your doctor, having heard about the high costs of medical malpractice insurance. In the past, there have been times when the premiums have indeed soared and tort reform has been needed. In some areas, doctors pay a lot for their insurance. However, thanks primarily to tort reform, malpractice insurance premiums have in fact gone down. The number of claims has decreased. Technologies such as electronic medical records (which reduce the number of medication errors) have reduced the number of mistakes doctors make.

So, the short answer is: You don’t have to worry about your malpractice suit ending your doctor’s practice. The only time doctors go out of business by malpractice suits is when they go over their insurers’ annual cap. Generally, this means multiple mistakes in a relatively short period of time. A competent doctor is not going to make that many mistakes and an incompetent one probably deserves to go out of business.

Learn More About Where Medical Malpractice Damage Money Comes From

If you are considering whether you have a case for medical malpractice, contact Weltchek Mallahan & Weltchek today. We can set up a free initial consultation to help you determine whether you should pursue a lawsuit and start the process quickly.