Malpractice: When to Settle a Suit and When to Fight

Neil Chesanow

September 25, 2013

A Malpractice Suit Is Probably in Your Future

If you have not yet been sued for medical malpractice, the odds are that your luck will not hold out.

One in 14 doctors faces a malpractice suit every year. This results in almost every doctor having to deal with a malpractice suit, or more than one, during his or her career.[1]

In Medscape's 2013 Malpractice Report, in which nearly 3500 physicians took part, the specialties experiencing the most lawsuits were internal medicine (15%), family medicine (13%), ob/gyn (9%), psychiatry (8%), cardiology (6%), pediatrics (5%), emergency medicine (4%), oncology (4%), anesthesiology (3%), diabetes and endocrinology (3%), general surgery (3%), and orthopedics (3%).

"Anytime there's an adverse outcome, there's a significant probability of litigation," says oncologist Richard E. Anderson, MD, CEO of The Doctors Company in Napa, California, the nation's largest physician-owned medical malpractice insurer.

"An adverse outcome is not malpractice," Anderson hastens to add. "An adverse outcome is an adverse outcome. A tiny fraction of adverse outcomes result from malpractice. But in our society, we're prepared to litigate every adverse outcome. At the end of the day, there's no way to provide ironclad protection from a malpractice suit.

As a result, more than 60% of doctors over age 55 have been sued at least once.[2] This works out to an average of 95 malpractice suits having been filed for every 100 physicians currently in practice, the American Medical Association estimates.

If and when your number comes up, what happens next? Let's take a look.

Whose Decision Is It to Settle or Fight?

If you're being sued because you made a medical error, your first instinct may be to settle rather than risk a far larger judgment in court. If you believe that you did nothing wrong, your first instinct may be to seek a jury trial to win vindication.

However, that decision may not be yours to make. The last word belongs to your malpractice insurance policy. Have you read it recently? If not, now would be a good time -- before a claim is made against you.

Does your policy contain a consent-to-settle clause? This is a clause in which, in the event of a malpractice suit, the policyholder (ie, the physician) is deemed to have consented to settle the suit without a trial. In other words, the decision on whether to settle or fight is the insurer's alone.

If you want the final say to be yours, choose a policy with a consent-to-settle clause that specifically states that the insurance company will not settle with a claimant unless you sign a consent-to-settle agreement.

However, "companies that write insurance have, over the years, become increasingly unwilling to put consent-to-settle language favorable to the doctor into their policies," cautions Joe McMenamin, JD, of McMenamin Law Offices in Richmond, Virginia.

Getting "Hammered" by Your Insurer

Even if your malpractice policy contains a consent-to-settle clause, it may technically give you the final say about whether to settle or fight -- but there may be a catch.

"Some insurers that have a written consent-to-settle clause into their agreements also write in what's referred to as a 'hammer clause,'" McMenamin says.

A consent-to-settle clause gives doctors a say in whether their cases will be tried or settled. A hammer clause effectively silences that voice by making the risk of losing a court battle so onerous to the policyholder that few physicians, even those who believe they are innocent and seek vindication, would take the gamble.

"Under the hammer clause provision, the defendant insured physician, confronted with an opportunity to settle for X dollars, and who, on the basis of the consent-to-settle clause, insists instead that he go to trial, and then loses, say, 2X dollars, is personally liable for the difference," McMenamin says.

"The hammer clause allows the insurer to say, 'Yes, Doctor, go ahead. We'll try the case. But if we can settle it for $500,000 today, and you take it to a jury, and the jury hits you for $1.5 million, then you're personally on the hook for the difference between $500,000 and $1.5 million. That's 1 million bucks out of your personal hide," McMenamin explains. "If there's a hammer clause in the contract, the consent-to-settle clause is rendered far less valuable."

"There are other policies in which the doctor has no voice whatsoever," McMenamin continues. "The company just says, 'It's our money. We do this every day. You do it once or twice in a career. We know what we're doing. You don't. So you have to leave it to us, the experts, and we'll make the call.'"

Even if there is a consent-to-settle clause and no hammer clause, the insurer could still try to dissuade a doctor from going to court when the doctor could lose -- and lose big.

"When we feel there's liability and the facts don't favor the doctor, we don't want to put the doctor in the path of a potentially angry jury and get a runaway verdict," Anderson says. "It doesn't make sense."

"Typically there will be a pretty serious conversation before trial at least between the lawyer and the client, or sometimes between the lawyer, the insurance representative, and the client, in which they will quite carefully consider the risks and benefits, the chances of success, and the potential range of the jury verdict at least to the extent that anybody could make a reasonable estimate of that, and a calculation is made," McMenamin says. "And you either go forward or you don't."

When Settling Makes Sense

Over 90% of medical malpractice cases are settled out of court.[3] It's easy to understand why: money. The average court settlement is about $425,000; the average jury award tops $1 million.[3] Most of the time, it's a lot cheaper to settle.

A common misconception is that settling a case before trial means forking over a ton of cash. In fact, settling may not cost you a dime, and it commonly doesn't.

"When people say 'settle out of court,' there's a notion that they paid something prior to trial," Anderson says. On the contrary, he says. "In our experience, while 90% of malpractice cases close without a trial, 90% of the 90% -- or 82% of all claims -- close with no payment whatsoever. That $425,000 figure applies only to the 18% of cases that go to trial. It ignores the 82% of cases that don't go to trial, where the indemnity is zero."

Of course, if you actually did mess up, the settlement will involve money.

"If there's a case in which there's liability, it's to everyone's advantage to pay the liability quickly and move on," Anderson says.

But money may not be the only, or even the main, reason to settle. If your expert witness doesn't come off well during depositions, it could undermine your case. If you aren't able to project a sympathetic image to the jury, the same is true.

"An exceptionally sympathetic plaintiff, even though the facts don't favor him or her, might jeopardize an otherwise winnable case," Anderson concedes.

"We only make nuisance settlements if a doctor doesn't want to go to court," Anderson says. "A doctor might not want to do it for a case that we feel is winnable for lots of reasons. It could be intercurrent illness. It could be the disruption and distress of a trial to a doctor's practice and family life."

Indeed, earlier this year, the journal Health Affairs published a study of data from nearly 41,000 doctors insured for malpractice by The Doctors Company.[4] Assuming that the typical physician career would span 40 years, the investigators found that the average doctor spends 50.7 months -- or almost 11% -- of his or her career with an unresolved, open malpractice claim.

That psychic burden takes its toll. Even more than potential monetary damages, time spent worrying about and adjudicating a liability claim shapes "how doctors perceive medical malpractice," the researchers concluded.

Not every doctor, innocent or not, is cut out for the long-term stress that a malpractice trial involves when a reasonable settlement option is on the table.

"There's very little vindication in victory," Anderson concedes. "The average claim that goes to trial is a 3- to 5-year process. Emotionally it's consuming. The allegations made are intensely personal. In high-dollar cases, some of that is played out in the press. Winning is better than losing, but it can be a Pyrrhic victory."

Other Reasons to Settle

Factors over which you have no control can jeopardize your case and be reasons to settle. The composition of the jury, for example. Or the jurisdiction in which the trial will be held. In conservative districts, the doctor may have an advantage, McMenamin says. In liberal ones, the patient may have an edge.

Recent decisions by your state supreme court on issues pertaining to your case can play a role as well. "Has the court been going the wrong way or the right way from your point of view?" McMenamin says. "Say you lose and have the case taken up on appeal. Whatever the court has been looking at in cases like yours has a direct impact on how your appeal is decided."

The reason is self-protection: Just as you have a reputation to protect, so does the judge trying your case.

"Just as lawyers hate to lose cases, trial judges hate to get reversed," McMenamin says." The trial judges read the reports from the state supreme court. They know which way the wind is blowing, and they don't want to be the first with a contrary ruling. If they get the sense that the supreme court judges in your state are looking at a particular fact pattern or problem in a certain way, then because they don't want to get reversed, they will tend to look at it in much the same way themselves, if they can."

If the fact pattern in your case is one in which your state supreme court tends to side with the plaintiff, even if you should win, the plaintiff has a good chance of ultimately triumphing on appeal. If, on the other hand, you lose your case, your request for appeal may be denied or you may lose that verdict.

"There isn't just one variable in this equation," McMenamin says. "There are dozens."

The National Practitioner Data Bank

Never far from the mind of doctors with a malpractice suit hanging over their heads is the stain on their records that will appear in the National Practitioner Data Bank (NPDB), which records any settlements or judgments against you.

The NPDB was created as a federal repository of information on healthcare providers in the United States.[5] Implemented in 1990, it requires reporting of adverse licensure, hospital privileges, and professional society actions against physicians and dentists related to quality of care. In addition, the NPDB tracks malpractice payments made for all healthcare practitioners.

"Doctors make a decision to settle or fight not just on whether they are liable for damages but also on what will happen if they take the easy way out and settle out of court," says internist Eric E. Shore, DO, JD, founding member of the Shore Legal Group in Bala Cynwyd, Pennsylvania. "Unless you win, whatever happens will go in the data bank. If you go to court for a case that could have been settled for $5000, even though you didn't do anything wrong, you have a good chance of walking away with a defense record."

But even a measly $5000 settlement appears in the NPDB, a prospect that sparks outsized fear in doctors. "What does it mean to be in the data bank?," Shore asks. "It just says, 'Settlement: negligence.' One or 2 lines." If there was injury to the patient, the doctor is entitled to add his own entry explaining it."

You may add a 4000-character statement that informs queriers, such as hospitals, insurers, and state licensing boards, of your side of the story.[6]

"But with a relatively small settlement, it doesn't make much difference," Shore reflects. "If someone has 5 lawsuits that money was paid out for over 25-30 years, that won't get anyone really upset. But 5 lawsuits in the past year would raise questions."

Making the Decision to Fight

There are plenty of reasons to settle a malpractice suit. But when do you fight?

"We go to court for 2 reasons," says Anderson of The Doctors Company. "One, we believe there's no liability; if there's no liability, we'll go to court and fight it. Two, if we believe there's liability but the plaintiff's demand is unreasonable, we would also go to court."

If there's no liability, Anderson says, "our record says that our chances of winning in court are 9 out of 10. When the facts favor us, we are more than willing and encouraged to go to court, as we win the vast majority of those battles."

But even when the facts don't favor the doctor, the doctor may still want a day in court, even against the lawyer's and insurer's advice -- provided, of course, that the doctor's policy contains a consent-to-settle clause that confers that right.

"Not every case has facts that are black and white," Anderson admits. "Often they're gray. But when a client says, 'I want to fight,' we go to war."

Many clients jeopardize their own cases by acting as if this were a proxy war fought on their behalf by their attorneys. They avoid getting involved as much as possible. But if you minimize your role in the process and your defense is weak, you will have only yourself to blame, experts assert.

"I would strongly encourage the doctor who is being sued to get in the game," McMenamin says. "By that I mean to actively participate in your own defense. I've encountered physicians who are so offended by this that they pull into their shells and go into denial. They want to ignore it. They want to take care of their patients and be left alone."

Doctors who want to leave everything to their malpractice attorneys give the lawyers too much credit, McMenamin cautions. "You may have a very smart lawyer," he says. "Maybe he's very experienced. That's all well and good. But except in rare circumstances, he's not a doctor, and even if he is, he probably doesn't have experience specific to your particular case. He needs to be educated, and you're the one to do it."

As a client, you need to be educated as well. "We work very hard to prepare our doctors for the stress of litigation and the whole process," Anderson says. "We have litigation retreats in which doctors actively in the middle of litigation can meet with colleagues who are in the same situation and with attorneys and professional counselors dealing with all of this. We do mock cross-examinations. Our defense attorneys prepare doctors for trials all the time."

Preparation is necessary for a host of reasons. Cross-examination, in particular, can be brutal. "The kinds of allegations that plaintiff attorneys make are intensely personal," Anderson says. "It's not just, 'We believe a different judgment should have been made.' The focus is on the fact that this doctor was negligent, this doctor was callous, this doctor was insensitive, cruel, and incompetent."

The ability of a doctor to make a good impression in the face of such a withering attack is an important part of winning a trial, McMenamin believes. "This is completely different from your mastery of surgery or psychiatry or whatever your specialty is," he says. "It's selling your version of events to the jury."

A Tale of 2 Defendants

Early in his career, McMenamin defended a doctor whom he did not prepare well for trial. The doctor nearly succeeded in snatching defeat from the jaws of victory.

"This doctor thought the case was completely without merit, that it was utterly frivolous, and that the plaintiff's expert was an SOB who did not deserve the time of day," McMenamin says. "Which, actually, I agreed with," he adds. "But it wasn't me on the witness stand with my chestnuts in the fire."

As the doctor sat in the witness stand, he draped an arm over the back of the chair, slouched in his seat, and imperiously looked down on the opposing counsel, both literally and figuratively, when being examined, "and by his body language and facial expression, and sometimes by his words, he conveyed very clearly nothing but utter contempt for this lawyer," McMenamin says.

As a result, McMenamin is convinced, a case that was "eminently defensible" ended up with a hung jury, although the doctor ultimately prevailed at retrial.

"Do things like this have an impact on how a jury thinks and how they vote?" McMenamin asks rhetorically. "In a perfect world, no. But in the world we have to live in, I'm convinced that they matter."

Compare this to another of McMenamin's cases, in which the doctor, a pediatrician, "got in the game," as McMenamin puts it. "The doctor was accused of malpractice in the way he handled a child with asthma," McMenamin recalls. "As a result, the child was admitted to the hospital, where he died.

"But this guy was very smart and had truly immersed himself in the case," McMenamin continues. "There was a question put to him on cross-examination by the plaintiff's counsel, who was clearly hostile. It was one of the most important events of the trial.

"The question was: 'On the 13th, I believe the patient's potassium level was 3.7, was it not?' And the doctor, without the chart in front of him, said, 'No, that was on the 14th. On the 13th, it was 3.8. Check page 35 in the chart. You'll find it there.'"

The chart was "several inches thick," McMenamin remembers. "The jury was in awe."

As it turned out, it was a stupid question. The child's potassium level was irrelevant. The plaintiff attorney didn't know that, but neither did the jury.

That the question was irrelevant didn't matter. In his response, the doctor gave a bravura show of competence which, after all, was what was on trial.

"This doctor knew his chart so well that without benefit of referring to it ,he could correct the opposing counsel," McMenamin says. "It was remarkable. And the jury got the message."

Tipping the Scales in Your Favor

McMenamin believes that many doctors absent themselves from the legal process -- to their detriment -- because they are used to being in control. The courtroom is alien territory. You are out of your element. You feel powerless.

"I think it's the feeling of helplessness as much as anything that's tough for doctors to swallow," he says. "They are used to being in charge. They're used to getting their own way. Part of the stress in the courtroom is that you don't know what's happening. You don't have much sense of any potential capacity to influence, much less dominate, events."

This is a profound misconception, McMenamin maintains. "You're not helpless," he insists. "You have far more power than you realize. The person in the witness stand has a lot of power if he knows how to use it. That, in part, is the counselor's job: to help the doctor understand that. You can be of great value to your counsel, and therefore to your own case, if you step up to the plate."


  1. Jena AB, Seabury S, Lakdawalla D, Chandra A. Malpractice risk according to physician specialty. N Engl J Med. 2011;365:629-636. Abstract

  2. Kane CK. Medical liability claim frequency: a 2007-2008 snapshot of physician. American Medical Association. 2010. Accessed September 16, 2013.

  3. Length and process of a medical malpractice suit. Accessed September 16, 2013.

  4. Seabury SA, Chandra A, Lakdawalla DN, Jena AB. On average, physicians spend nearly 11 percent of their 40-year careers with an open, unresolved malpractice claim. Health Affairs (Millwood). 2013;32:111-119.

  5. National Practitioner Data Bank. About us. US Department of Health and Human Resources. Accessed September 16, 2013.

  6. National Practitioner Data Bank. Frequently asked questions. US Department of Health and Human Resources. Accessed September 16, 2013.