Thursday, December 13, 2012

How lawyers deal with being sued for legal malpractice




The September 2012 issue of the AARP Bulletin has a story about a woman who sued an elder-law attorney for legal malpractice. Bear with me. It’s an interesting tale.

In 2004, a man consulted an elder-law attorney to set up a trust that would distribute his assets fairly. He had a daughter from his previous marriage and his wife had five children from her previous marriage. The story is a bit complicated, but his plan was that should he die first, the wife would inherit everything. Then when she died, his biologic daughter was to receive all of whatever was left of the money.

But the lawyer made an error and the trust actually was written in such a way that all six children (his daughter and his wife’s five) would get equal shares of the estate instead of his daughter getting it all.

Sure enough, the man died first and the mistake was discovered. The wife had not yet died but the man’s daughter sued the attorney for legal malpractice. He admitted the error but defended himself by saying the daughter had not yet suffered any damages so he owed her nothing. He also said the amount of money that might be left in the trust was impossible to calculate.

Based on the life expectancy of the wife and the amount of money in the trust, it was estimated that the daughter should have been entitled to over $500,000 when the wife finally dies.

The court ruled that the lawyer’s reasoning had some merit, but because of the serious nature of the error, it awarded the daughter $472,000 in damages.

Fine and dandy, right?

Not so fast. You see, lawyers don’t have to carry malpractice insurance.

Here’s how the story ends: “[The lawyer] decided to declare bankruptcy, which released him from his obligation to pay [the daughter].”

The story doesn’t mention whether the daughter had to pay her lawyer or any other fees.

When I finished reading the article, I was infuriated. I thought back to the origins of the medical malpractice crisis. When I was a resident in the early 1970s, general surgeons were paying less than $500 per year for malpractice insurance. When commercial insurers withdrew from the market, many state medical societies hastily established physician-owned mutual insurance companies. Shortly thereafter, premium rates shot up and here we are.

I’ve often wondered what would have happened had the medical societies simply thrown up their collective hands and said, “What are we to do? No one will insure our doctors.” Would state governments have stepped in? Would that have been a good thing or a bad thing? What about the federal government? Would we still have the ongoing crisis?

If you want to have some fun, play “What’s My Premium?” on the New York physician-owned malpractice company’s website. You can query any specialty in any county in the state. For example, a neurosurgeon in Nassau County (suburban New York City) is currently paying $315,000 per year for malpractice coverage. OB/GYN in the Bronx? $183,247.00.

In July, the New York Times reported that some hospitals in New York are dropping their malpractice insurance because they can’t afford it any longer, and they may not have enough money set aside to pay judgments against them.

The hospitals use the fact that they have little money to pay out as negotiating leverage. The hospitals tell plaintiffs to either take what little is offered as a settlement or risk getting nothing if the hospital goes bankrupt and closes.

Maybe the hospitals are learning from the lawyers. What about us physicians? Will we ever learn?

3 comments:

artiger said...

It is infuriating, but it's par for the course.

In mid-2003, I went bare for about a month (for various reasons, of which I will provide details if anyone wants to hear the sob story). Naturally, I was concerned about being sued for any reason; however, it was still fairly early in my career, and I had very few assets (read: none, but I had plenty of debt). So, I got this idea that I would provide a form to every patient I saw, in the hospital or in the office, prior to evaluating and treating them. The form said that the patient had been made aware that Dr. Artiger did not currently have liability coverage, that Dr. Artiger had explained this to the patient, and that the patient was in agreement to proceed with care provided by Dr. Artiger under these circumstances. If the patient did not agree, I kindly offered to make a referral to another surgeon, no hard feelings. I don't know that any attorney ever laid eyes on one of those forms, but I felt better knowing that they knew a suit against me would be tapping a dry well.

Interestingly enough, in a month's time, only one patient refused to sign.

Skeptical Scalpel said...

I'm not a lawyer, but I've seen them on TV. I'm not sure what your form was meant to accomplish. I believe you may have risked the attachment of future earnings had you been successfully sued. Also, I don't know where you were practicing, but very few hospitals will let you stay on staff without malpractice insurance. That's because they would have had to make up the difference in a payment had someone won a judgement against you both.

artiger said...

The form was meant to accomplish a few things. First, it was honest disclosure. I felt that the patient had the right to know that I was uninsured, and could so choose someone else for surgical care (unlike the attorney mentioned in your example; perhaps the client may have chosen one who did carry liability coverage?). Second, had I been sued, I likely would have pulled the same stunt as the same attorney; declare bankruptcy (I doubt I would have continued in surgery, or even possibly medicine in such a situation). Finally, as I stated, it would have served to notify a potential litigant that my pockets were very shallow; that would hopefully have led to a fishing expedition in different waters.

I practice in the rural South. Believe it or not, there are a few little hospitals that are willing to keep a surgeon around even without liability coverage. Like I said on the robot thread, that's another reason I like it down here.

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