By Glenn Day and Roy Musgrove

We used to consider outsized awards on medical malpractice claims “outliers” that were notable but uncommon. Today, though, we have an environment where the high severity claims are happening so often that what once were outliers are now the new norm.

They also are a major driver of a correction underway in the insurance markets, and as a result, the entire medical community can expect to feel the pressure on medical malpractice premiums, coverages and limits.

This probably could have been predicted, given the consolidation of the medical business since 2008. The shortage of medical professionals and the gradual loss of the personal touch of an earlier era increased the risk of malpractice claims. Other developments also have helped, like the growth of a cottage industry that finances medical malpractice lawsuits in return for a piece of the judgement.

And, too, juries are becoming more sympathetic to plaintiffs, with larger awards the result. One example is last year’s record-setting $205 million verdict against Johns Hopkins Bayview Medical Center. The plaintiff was a woman who declined recommended care for herself and her baby during pregnancy; the baby suffered a brain injury during birth.

It’s all driven a worsening cycle since 2014:

  • The severity of medical payments and defense expenses has skyrocketed. Only four verdicts surpassed $25 million in 2014. By 2017, that number had more than tripled to 13 and reached 17 in 2018.
  • The medical community has protected itself by purchasing higher limits and aggregates (for example, $1 million paid per occurrence and $3 million aggregate, or for all claims in one year). More excess (or umbrella) coverage has been layered on, too, coming into play when claims covered by the primary policy are exhausted, another factor in mega-verdicts.
  • With larger targets in the medical field carrying higher limits on their malpractice insurance, plaintiff lawyers have more aggressively pursued the more difficult cases. One study showed a correlation between higher limits and higher settlements and awards.

The high frequency/high severity claims issue has squeezed insurers’ profitability to the point that many experts predict a doubling of medical malpractice insurance premiums by 2027. Future policy renewals are likely to see increases of 5% to 7% for physicians to as much as 35% for large medical groups.

Your best course of action moving forward? Risk management has never been more important. Neither has the role of an independent broker with deep expertise and insurance relationships in healthcare.

HUB International’s team of healthcare specialists is ready to help your organization assess its risks and ensure that your medical malpractice coverage is sufficient for the litigiousness that characterizes today’s medical industry.