Beyond Tort Reform: Fixing The Economics Of Med Mal Litigation

Many in the insurance industry look to tort reform as the main solution, viewing it as the best means of controlling the severity of risks. Much hope is invested in caps on damages that would translate to lower judgments and, predictably, lower settlements. It is also hoped that tort reform will provide a disincentive for plaintiffs to file suits, with the risk/reward no longer so attractive.

While this may all come to pass, the effects of any sort of reform will filter slowly into the legal system. Applicability of new legislation (as stated in a reform bill approved by the U.S. House of Representatives in March) will not be retroactive to cases now being litigated. Carriers cannot afford to take a "wait-for-it-to-be-fixed" outlook in a business that bleeds litigation dollars around the clock.

Consider also the great number of cases in which the largest loss component is defense fees and costs, rather than judgment or settlement amounts, and it becomes clear that tort reform is only a partial solution.

With or without tort reform, the current state of crisis calls for carriers to reexamine litigation methods, implement best practices and gain an increased level of control. Carriers should have a process firmly in place that fosters prudent economics in all aspects of medical malpractice claims litigation.

This begins with selecting highly qualified defense counsel and then establishing a collaborative, efficient relationship with the attorneys. To the greatest extent possible, selection of counsel should be based upon proven effectiveness in the practice area of the client.

Further, medical malpractice claims tend to be complex and emotionally charged, requiring that attorneys be sensitive to the tripartite relationship between insured, carrier and counsel, and be willing to embrace open lines of communication. Because the complicated nature of this litigation and resulting attorney fees and costs often leaves little under the diminished limits policies for settlement or judgment amounts, counsel should be mindful that they, too, have a role in managing limited assets as best serves the insured.

Once counsel is selected, it is the mission of the claims staff to see that the case is handled in the most diligent and efficient way possible. This requires systematic collaboration in the form of strong and continuous exchange between claims personnel and counsel.

Such communication helps the claims staff focus counsel on the agreed defense strategy, aiming to make efficient use of time, keep expenses to a reasonable level, and produce the best outcome for the insured. There is nothing more essential to the economics of medical malpractice litigation than strong collaboration between carrier and counsel.

Having set forth this reminder about best practices in medical malpractice litigation, it is important to note some means of assistance.

There are proven methods and diagnostic tools available to aid in the process of selecting counsel and managing an interactive litigation process. Metrics can be obtained that provide analysis of attorney performance by type of case and in specific jurisdictions.

These metrics help identify attorneys with expertise corresponding to the strategic needs of a case, and possibly with experience litigating against plaintiff's counsel. Most carriers can probably improve their ability to procure effective lawyering by making use of such data. To the claims staff, having an objective, outcome-driven assessment in hand to back up an argument for a particular attorney or law firm is often of added value.

It is of course also necessary that attorneys be amenable to the carrier's billing and reporting practices.

Many carriers are now using Web-based applications for tracking hours, billing and payment, and law firms must be both technically and philosophically able to work with these processes. The intricacy of medical malpractice litigation makes it a prime candidate for the control rendered by a variety of other technology tools as well.

The document-heavy nature of the process lends itself greatly to Web-based exchange of file information, making the process far more "paper-light." The time delays and human energy consumption of trading stack upon stack of paper back and forth can be minimized when such online file documentation is employed.

Carriers and counsel who take advantage of such technological opportunities can greatly streamline the process, lower costs and advance the pace of litigation.

The emotionally charged, high stakes nature of medical malpractice litigation demands highly controlled case management, making use of the many methods and tools that are available. By whatever means accomplished, a communication-intense, collaborative relationship between carrier and counsel is fundamentally important regardless of what happens in federal or state legislation.

At stake is the ability of insurance companies to provide doctors with professional liability coverage and, consequently, the ability of doctors to stay in practice. Those carriers who decide to stay in the business need to manage the defense relationship efficiently and effectively or they are going to be out of the business whether there is tort reform or not.

It is understood that the unrelenting pressure of the business makes it difficult to stop and make changes in procedures. However, taking some time for process review, being mindful of what can be immediately gained by better communication and better use of technology, is a valuable start.

Eventually, as the process is refined, there will be more control, better outcomes and, most important, the ability to maintain a commitment to serve the needs of the medical profession.

T. David Ackerman is vice president of Kemper Professional, where he manages errors & omissions claims involving inter alia, accountants, lawyers, miscellaneous professional services and health care services providers. He can be reached at tdavid.ackerman@kemperinsurance.com.

Reproduced from National Underwriter Edition, April 28, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.