Can I Lose My House if I Get Sued?

Mark Crane

Disclosures

May 18, 2016

In This Article

What Insurance Usually Won't Cover

Insurance policies cover negligence in the practice of medicine. They don't cover punitive damages or other "intentional" torts—meaning willful actions, such as sexual harassment.

The insurer will usually provide a defense for the doctor in a case involving inappropriate relations with a patient, or a privacy violation. But it will do so under a "reservation of rights" clause, meaning that the doctor could be on the hook for any indemnity award, said Miriam Weizenbaum. "Even then, depending on how strong the case is, the insurer might be willing to pay a portion of the award while the doctor pays the rest."

Punitive damages are excluded from all insurance policies. Such awards are rare. "It has to be outrageous, almost intentional misconduct," said Sacopulos. "For example, an oncologist who cuts his patient's dose in half so he can make more money. It isn't an honest mistake. It's a deliberate action, bordering on the malicious."

A physician also can blow his coverage and leave his personal assets exposed. Some insurance policies specify that alteration of medical records can cancel the policy, whereas while others will still provide a defense and pay the award, lawyers say.

Not cooperating with the insurer in the defense of the case can cause cancellation of the policy. "Coverage can be withdrawn. An attorney can't properly defend a doctor who won't return his or her phone calls or prepare for depositions and trials," said Sacopulos. "That's written into every policy.

Finally, the doctor's assets could be on the line if his or her insurer becomes insolvent. Although that's also rare, it has happened. Most states have guaranty funds to cover policyholders if a licensed insurer is in financial trouble. However, the amount is often less than what a jury may award, and physicians have been required to pay something out of their own funds. Doctors should be wary of companies with deeply discounted premiums that might not be around when the claim comes due.

Why the Fear of Losing Your House Persists

If attaching a physician's assets is so rare, why do so many doctors worry about it? Predictably, plaintiffs' and defense attorneys disagree on this.

"Any doctor who has ever given a deposition or testified in court soon realizes just how aggressive plaintiffs' attorneys can be," said Michael Sacopulos. "It's not hard to think that they'll gladly go after your house and life savings."

Physicians are out of their element in litigation, so fear of the unknown plays a role. "Doctors work hard, and their homes are important to them. A lawsuit threatens the stability of their lives," said Nancy Miller. "Having to pay personal assets may be rare, but it's certainly possible, and no one can guarantee that it will never happen."

The other aspect may be the law of odds. Even if the potential consequences are rare, they're terrible if they happen to you—and for many, that's worth worrying about.

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