You may think that if having some malpractice insurance is good, more will be better. But that’s not the case. In fact, if you have millions in malpractice insurance, you are practically inviting a lawsuit. Here’s why:
Before malpractice attorneys take a case, they will investigate whether there is the potential for sufficient payout. Filing a lawsuit takes time and can be very costly. So unless there is a reasonable possibility of a big payout to justify the time and expense required in filing suit and pursuing it all the way to a successful ending with a high pay-out, attorneys will consider a suit “unviable” and not accept the case.
A very high malpractice insurance coverage signals to malpractice attorneys that yes, there is money to be made. So they are much more likely to sue.
If, on the other hand, you have only minimal coverage, attorneys will not find it viable to pursue a lawsuit. It would simply not be worth it. Even if they should win, they may not even make their expenses back.
Of course, this strategy only works in combination with proper asset protection. If you have not protected your assets, the attorney will simply go after your personal assets.
But if you have your assets so well protected that they can’t touch them, and you also don’t have excessive malpractice insurance coverage, you will not be a desirable target for a lawsuit
Here are two examples for how this would work:
1) A cardiologist screws up in the cath lab, thereby causing a substantial injury to a patient. The cardiologist’s bedside manner is not very good either, so when the patient runs into a personal injury attorney, the attorney talks the patient into signing up with him/her to look into a potential medical malpractice claim.
The attorney files the needed paperwork to start the discovery process and finds that the cardiologist has $1,000,000/$3,000,000 in malpractice coverage as well as several million dollars in personal assets.
After some time, the patient, due to the negligence of the cardiologist, has several surgeries to correct the problem; and now the patient is totally disabled for life and has $1,000,000 worth of medical bills.
After discovery revealed the assets of the physician, the personal injury attorney files suit and asks for $5,000,000.
2) Here is the same scenario with the same damages of scenario number one, but this time, when the personal injury attorney does his discovery, s/he finds out that, while the physician has $3,000,000 of personal assets, those assets are fully asset protected and are not going to be assets available in a malpractice suit.
Because the medical bills are $1,000,000 and the malpractice coverage limits for the cardiologist are $1,000,000 per claim, the personal injury attorney decided not to spend the $85,000 + in expenses it would take to get the case to trial and tells the patient that, while it is clear malpractice took place, the case is not financially viable; and, therefore, the attorney could not take the case.
The only difference in the two scenarios above is that the physician’s $3,000,000 personal assets were totally asset protected from lawsuits.
How much insurance is enough, though? Everybody’s situation is different. Each state has different legal requirements. It will take an expert in asset protection to ensure that you have enough but not too much insurance, and, even more importantly, that your assets are properly protected so that a frivolous lawsuit cannot take them away from you.
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