The Dangers of Going Bare

News

Have a proposal for FOGS or looking for a service?
Use this link to contact our office.
More...

Thank You!
FOGS and the Florida Section ACOG recognize their corporate supporters
More...

Liability Issues Report
Please use this form liberally to report the related practice problems you are facing
The Form

On Call Medical Coats
FOGS has teamed up with On Call Medical Coats to offer our members quality embroidered labcoats
Shop for Coats

FOGS Endorsed Malpractice Carrier offering a 5% discount to FOGS members
More Info

Lubell & Rosen
FOGS Endorsed
Pre-Paid Legal Defense
More Info

Your practice could receive a dividend of up to 24.8% of your workers compensation premium.
More Info

The Dangers of Going Bare

This article is provided by First Professionals Ins. Co., Inc.

The professional liability insurance industry is in the midst of another crisis. Several factors have contributed to the current market conditions, such as erosion in patient loyalty, managed care, an increase in the number of attorneys, changes in how juries are selected, and rising awards to plaintiffs. In the last five years the average jury verdict has risen by 60 percent. As a result of the crisis and the increased costs of professional liability insurance, many physicians and other healthcare providers are limiting the scope of their practice or no longer practicing altogether. Still other physicians are making the difficult choice to deal with the crisis by not obtaining professional liability insurance, more commonly referred to as "going bare."

According to the state records, there are approximately 1,500 physicians currently practicing medicine without liability insurance, but this number is expected to rise dramatically in 2003. A physician that goes bare still faces the same chances of being sued by a patient. If a physician elects to go bare and fails (after all applicable appeals) to pay a court judgment, arbitration award, or settlement agreement arising from a case of medical malpractice, the Florida Department of Health is required to issue an emergency order resulting in the suspension of the physician’s medical license. A physician’s continued failure to pay in this instance will result in a disciplinary action by the Department of Health, Florida Board of Medicine of at least probation, with a restriction that payments be made on a scheduled basis. For those unable or unwilling to pay, the result will almost certainly be a suspension of that physician’s medical license.

One must also consider the insurance requirements of hospitals or other entities with whom they contract, such as HMOs. While some hospitals have decided to allow staff physicians to go bare, HMOs, at least so far, are not. Many HMO contracts contain clauses requiring physicians to maintain professional liability insurance and to hold the HMO harmless. A physician who goes bare under such circumstances may expose himself to a lawsuit brought by the HMO for indemnification if the HMO is forced to incur costs defending itself and paying losses caused by a bare physician.

This same scenario can repeat itself if the hospital that allows a physician to go bare or uninsured is forced to pay a settlement because of the physician’s negligence. The hospital has the right, under Florida law, to pursue physicians after entering into a settlement with the plaintiff. Insured, co-defendant physicians may do so as well. This right is set forth in Florida’s Uniform Contribution Among Tortfeasors Act, Florida Statute 768.31. This act gives any defendant in a lawsuit the right to settle the case and pursue any party, named or unnamed in the lawsuit, in a subsequent action for contribution. The act provides no protection from the statute of limitation, which generally governs medical malpractice actions because the act provides the action for contribution can be brought for up to one year following the settlement of the claim. While hospitals, HMOs, or other physicians may support your decision to go bare, that does not mean that they are willing to pay your losses. They, and more likely their insurers, are free to pursue an action when they believe a bare physician caused or contributed to a loss they sustained.

If a physician makes the difficult choice to go bare, there are additional issues that must be considered. Compliance with Florida’s Financial Responsibility Statute (the "Statute") must be established with the Florida Board of Medicine as a condition of licensing at the time of licensure renewal or reactivation. For physicians relying upon an exemption under the Statute, there is an ongoing duty to report to the Florida Department of Health, in writing, regarding any changes in circumstances concerning qualifications for the exemption.

Going bare in Florida also requires that physicians make provisions to inform patients that the physician is practicing without the benefit of professional liability coverage. Physicians are required to post a sign in the waiting room with defined language that includes, but is not limited to, a statement in capital letters stating: "YOUR DOCTOR HAS DECIDED NOT TO CARRY MEDICAL MALPRACTICE INSURANCE." This may have an effect on the confidence and relationship that a patient has or potential patient may have with the physician. This notice requirement may also become problematic when a physician does not practice in an actual office setting, such as an anesthesiologist.

It is extremely important for a physician going bare to purchase tail coverage from their current carrier. Such coverage will protect the physician against claims for past actions while that physician was insured. While the physician is not required to purchase tail coverage, the failure to do so will effectively result in the forfeiture of all the money previously paid for professional liability coverage. In other words, since this is not an occurrence policy, if the physician does not purchase the costly tail coverage, premiums previously paid all the way back to the retroactive date will not cover claims reported after the claims-made coverage has expired.

Most physicians are also surprised to learn that it is extremely difficult for a bare physician to obtain professional liability coverage in the future. In addition, professional liability carriers seldom provide retroactive coverage for the period of time that the physician was bare. Finally, insurance carriers will generally not accept a laundry list of patient incidents, also known as "dumping," just prior to a physician’s decision to stop purchasing insurance from their current carrier.

By going bare, a physician also loses the intensive litigation management that an insurance carrier is able to provide when a claim is made. Through the carrier’s expertise in handling claims and its established relationships, the carrier is better able to control expenses in defense of a claim. In Florida in 2002, the average cost to defend a case by a carrier, not including the trial portion, is $31,249; if the case goes to trial the average cost is $123,290. A physician who is forced to defend against a claim alone may easily incur legal bills in excess of 50 to 100 percent of the carrier’s costs as insurance carriers are able to negotiate lower fees with defense attorneys. It should also be noted that because a physician has to go through this process alone, the physician is forced to endure what is often times a prolonged and substantial interruption in their practice because of the monumental hours needed to properly prepare a defense on one’s own.

Bare physicians will also have to deal with intrusions by plaintiff attorneys. When a physician who decides to go bare is sued, they can expect to be approached by the plaintiff’s attorney with an offer of settlement at some point during the litigation. The attorney will usually offer the bare physician an offer of settlement whereby the plaintiff will not proceed with the case against the bare physician in exchange for the bare physician’s agreement to criticize his or her insured co-defendant(s) in deposition or at trial. The bare physician(s) must then make what is often a very difficult decision: to either go against colleagues or be forced to pay a settlement or verdict. If the bare physician refuses to go along, the plaintiff attorney will likely take aggressive action against the bare physician for not testifying against a colleague.

In Florida, the state exemptions to the federal bankruptcy laws are very liberal. Currently, with few limitations, bare physicians are able to protect the full value of their home in a bankruptcy proceeding. Currently, there is pending legislation in the United States Congress that would override Florida’s state laws and dramatically cap the amount of equity that can be protected in a home. This same pending legislation proposes a significant change that would prevent most physicians from immediately discharging their debt in a bankruptcy proceeding. Rather, a physician would first be required to work for a number of years and pay off the debt in a manner that would dramatically reduce one’s lifestyle before discharging all debts. This new legislation will clearly make it more difficult to settle a case for a bare physician because of the reduction in the ability to protect assets from creditors. Moreover, in a groundbreaking case in South Florida, a bare physician who had declared bankruptcy and protected his assets in his home by placing them in his wife’s name only was forced to pay the first $250,000 of the settlement. The judge ruled that the first $250,000 was a condition of licensing, thereby forcing the physician to pay.

Going bare is not a one-time event for a physician. One does not go bare and then forget about it until a case arrives. There is a lot of time and planning involved in maintaining the status of a bare physician. Every time a bare physician obtains a new asset, it has to be determined how to protect that asset. A physician must have an ongoing plan to hold on to their assets or else they may be lost. The expenses of such a plan will offset and often times even exceed the cost of the professional liability insurance premium.

Finally, a bare physician has no insurance in defending oneself in connection with a license investigation by the Florida Department of Health, Florida Board of Medicine, or any investigation involving Medicare/Medicaid Fraud & Abuse by Federal and State regulators. Defending these claims are expensive and the initiation of a licensure investigation can come from numerous sources, including but not limited to, patients, ex-spouses, competitors, and even those who chose to remain anonymous. These complaints spark an investigation that puts a physician’s reputation and livelihood on the line. It is at this point in time that physicians need the experience of their professional liability insurance carrier.

The choice to go bare is one that only the physician can make, but such a choice should only be made after careful consideration of all the factors involved. Often, physicians learn the value of professional liability insurance coverage the hard way: after going bare and being faced with a medical malpractice case. The financial exposure, vulnerability to disciplinary action, and practical limitations as described in this article set the stage for financial ruin and the utter destruction of a physician’s career in medicine. Most physicians weigh the risk factors of going bare and conclude that insurance is the reasonable choice to protect their finances, livelihood, and professional reputation.