Doctor’s Right to Refuse: The Consent-to-Settle Clause and Your Medical Malpractice Case

In the high-stakes world of medical malpractice claims, a seemingly small clause in a doctor’s insurance policy can have a monumental impact on the outcome of a case. This is the “consent-to-settle” clause. While approximately 95% of malpractice insurance claims are settled before trial, this clause can be a significant barrier to resolution, potentially prolonging the legal process and increasing costs. Understanding this clause is crucial, especially considering that New York, for example, sees a high volume of medical malpractice claims, with an average of around 85 claims per 1 million residents.

What is a Consent-to-Settle Clause?

A consent-to-settle clause is a provision in a medical malpractice insurance policy that grants the physician the right to decide whether or not to settle a claim. In essence, the insurance company cannot settle a malpractice claim without the doctor’s explicit written consent. This is a “selling point” used by many medical malpractice insurance companies. Physicians often favor these clauses because they retain control over their professional reputation and can avoid the potential negative consequences of a settlement, regardless of the strength of the evidence against them.

Why Doctors Might Refuse to Settle

Several reasons might motivate a physician to refuse a settlement, even when it seems like the most logical course of action:

Reputation: A settlement, even without admission of guilt, can damage a doctor’s reputation. Settlements are often reported to the National Practitioner Data Bank, which hospitals and insurance groups consult when contracting with physicians or granting hospital privileges.
Principle: A doctor may genuinely believe they did not commit malpractice and wish to defend their actions in court.
Fear of Disciplinary Action: Although rare, a doctor might fear that settling a case could lead to disciplinary action from the medical board, such as suspension or revocation of their license.
Impact on Insurance Premiums: Doctors might worry that settling a claim will lead to increased insurance premiums in the future.

The Insurance Company’s Perspective

Insurance companies are typically motivated to settle claims to avoid the larger settlements and increased defense costs associated with going to trial. They assess the merits of the case and weigh them against the potential financial payout of litigation to make informed business decisions about settlement. Without a consent-to-settle clause, the insurer generally has the right to settle any claim it deems appropriate, even arguably frivolous ones, within the policy limits.

The Hammer Clause: A Counterbalance

To counter a physician’s refusal to settle, some insurance companies employ a “hammer clause.” This clause can either override the physician’s refusal to consent to settle in certain situations or make the physician financially responsible for any amount exceeding what the case could have been settled for if they lose at trial.

Here’s how a hammer clause works: If the insurance company recommends settling a claim for a specific amount, but the physician refuses, and the case proceeds to trial, resulting in a judgment higher than the proposed settlement amount, the physician becomes liable for the difference. For example, if the insurer suggests settling for $500,000, but the doctor declines, and the court awards the plaintiff $750,000, the doctor may be responsible for paying the $250,000 difference.

While hammer clauses are gaining popularity, some physician groups caution against signing agreements containing them.

The Legal and Ethical Considerations

The consent-to-settle clause presents complex legal and ethical considerations for all parties involved:

The Doctor’s Rights: The clause protects the doctor’s right to defend their reputation and practice.
The Patient’s Rights: The clause can potentially delay or prevent a patient from receiving compensation for their injuries.
The Insurance Company’s Duty: The insurance company has a duty to act in good faith and protect the interests of both the insured and the company.

Some legal scholars argue that these clauses can violate public policy by allowing physicians to prioritize their interests over those of injured patients.

State-by-State Variations

The enforceability and interpretation of consent-to-settle clauses can vary significantly from state to state. Some states may have specific laws or regulations that govern these clauses, particularly regarding the “reasonableness” of an insured’s refusal to consent to settlement. In Massachusetts, for example, the Supreme Court has ruled that a “consent to settle” clause in a liability policy is valid and enforceable.

Advice for Physicians

Given the complexities surrounding consent-to-settle clauses, physicians should take the following steps:

Carefully Review Your Policy: Understand the specific language of your medical malpractice insurance policy, including any consent-to-settle or hammer clauses.
Seek Legal Counsel: Consult with an attorney experienced in medical malpractice insurance to fully understand your rights and obligations.
Consider the Potential Consequences: Weigh the potential benefits of refusing a settlement against the risks of proceeding to trial.
Communicate with Your Insurer: Maintain open communication with your insurance company throughout the claims process.

Advice for Patients

If you believe you have been a victim of medical malpractice, it is essential to:

Consult with a Medical Malpractice Attorney: An experienced attorney can evaluate your case and advise you on your legal options.
Understand the Consent-to-Settle Clause: Be aware that the doctor’s insurance policy may contain a consent-to-settle clause, which could impact the settlement process.
Be Patient: The legal process can be lengthy and complex, especially when a consent-to-settle clause is involved.

Conclusion

The “Doctor’s Right to Refuse: The Consent-to-Settle Clause and Your Medical Malpractice Case” is a critical aspect of medical malpractice litigation. It highlights the tension between a physician’s right to protect their reputation and an injured patient’s right to seek compensation. By understanding the intricacies of this clause, both doctors and patients can navigate the legal process more effectively.

If you have questions about a medical malpractice claim, contact us today for a consultation.