Charles Silver

How Much Malpractice Coverage Does Your Doctor Have?

I recently suffered a grave injury during a hearing and balance test. The internal carotid artery on my right side dissected, a result of applying torque to my neck so a computer could get better readings from electrodes attached to my skin. A massive blood clot formed, blocking the artery 80-90 percent. I suffered blinding headaches, nerve damage, and other problems, and was hospitalized for over a week. Still, I count myself lucky. I’m alive and, apparently, I didn’t suffer a stroke. My doctors remain hopeful that, with time, I’ll recover.

Suppose I had died. My estate might have had a sizeable malpractice claim against the doctor who treated me. I’m a 49 year old male employed at a good salary. My lost future income would have run into the millions. My claim would also have had strong jury appeal. Ear exams should never kill people. The extraordinary result would strongly have suggested a medical mistake.

Assume with me that my “hard” damages, meaning my health care costs, lost wages, and other expenses, would have been $3 million. One might then infer that $3 million would be a realistic amount for my estate to recover. That would probably be wrong. Although the law allows recovery of economic damages in full, most doctors carry much less than $3 million in malpractice insurance and insurance is the only source from which my estate would have been able to collect.

This is the lesson of 14 years of medical malpractice litigation in Texas. Using a database of over 9,000 claims against doctors that closed with payments from 1990 to 2003, my colleagues and I discovered the following:
• Patients injured by medical malpractice rarely recover more than their physicians’ insurance policy limits.
• Malpractice payments stack up at the policy limits, suggesting that insurance policies cap recoveries even when patients deserve much more.
• Many doctors have small insurance policies. Almost 1/3 of Texas physicians with paid malpractice claims had $200,000 in coverage or less.
• Doctors almost never use personal assets to resolve malpractice claims. The claim that ‘every physician is one lawsuit away from financial ruin’ is a myth.

These findings (and many others) are fully set out in two articles that are forthcoming in peer-reviewed publications.

It takes some patience and thought to understand these results, so bear with me as I explain them. To keep the presentation simple and short, I’ll tie everything into one set of graphs.

My colleagues and I began by comparing the payments patients received to the amount of professional liability coverage doctors’ carried. Suppose a patient received $500,000 and a doctor had $1 million in insurance. The Payment-To-Limit Ratio (or PTL ratio for short) would be 0.5. If the patient received $1 million, the PTL ratio would be 1. If the patient received $1.5 million, the PTL ratio would be 1.5.

The figures below plot the actual PTL ratios. The figure on the left is for all types of malpractice claims. The one on the right is for claims involving newborn infants. These are the so-called “bad baby” cases that are thought to be exceptionally expensive and to expose doctors to enormous personal risks. The height of each bar shows the percentage of the claims with particular ratios. In the “All Claims” figure, about 16% of the claims had PTL ratios between .95 and 1. In the “Perinatal Claims” figure, the PTL ratio fell in this range about 32% of the time. Although the graphs don’t show this, in both types of cases, the vast majority of the claims in the spikes were PTL=1, meaning that the patient recovered the policy limits in full.

FIGURE 1: Distributions of Payment-to-Limit Ratios
All Claims (n = 9,389) Perinatal Claims (n = 1,037)


Notice that, in both figures, although there are sizeable spikes at PTL=1, there are very few cases with payments above the policy limits. Payments above the policy limits, which appear to the right of the spikes, were present in about 2% of the cases.

In combination, the spike at PTL=1 and the dearth of cases with larger ratios show that, as a practical matter, payments are capped at the limits of doctors’ insurance polices. Patients with strong claims, severe injuries, and sizeable damages have a good chance of recovering their doctors’ policy limits, but they have little or no chance of receiving more. This truth is especially prominent in “bad baby” cases, where the policy limits were paid 32% of time but payments above the limits occurred in only 2.4% of the cases. An infant injured by malpractice may need a lifetime of care, but an OB/GYN’s contribution to the cost of that care will equal at most the amount of insurance he or she carries. The parents or society at large will have to bear the remaining cost or the infant will have to do without.

Why can’t injured babies and other deserving patients get full compensation? The most likely reason, I believe, is that no more money is to be had. Not all doctors are rich, and those who are rich—who live in mansions, drive fancy cars, and send their kids to expensive private schools—are protected by state laws, trusts, limited partnerships, and other devices that insulate their assets. One can’t squeeze blood from a stone—or a turnip, as we Texans often say. The rarity of out-of-pocket payments by physicians bears this out. Doctors used personal assets to help resolve malpractice claims in only about one-half of one percent of the cases. We talked with plaintiffs’ attorneys who said they don’t even investigate doctors’ personal assets because they know they can’t reach them.

Because insurance is the sole source of payments for most injured patients, it is important to know how much liability coverage doctors carry. The conventional wisdom is that most physicians have $1 million in coverage. Medicare takes this mantra so seriously that it bases payments to physicians partly on premiums tied to policies of this size. In fact, most Texas physicians carried much less insurance. In our dataset, the median nominal policy limit was $500,000. 32% of the closed claim reports indicated that the doctor carried $200,000 (nominal) or less in coverage. Surprisingly, doctors who treated newborns carried less insurance than others, even though “bad baby” cases are thought to present the most serious financial risks.

We also found that, over time, the real amount of insurance available to cover patients’ losses shrank by about 30% in inflation-adjusted dollars. When stumping for tort reform, doctors told the world they faced rising malpractice exposure because jury verdicts were skyrocketing. Yet, they didn’t buy larger liability policies. Evidently, they didn’t think they needed them. And they were right. Doctors’ personal assets remained well protected even though they carried less real insurance coverage.

In reality, then, damages caps have existed for decades. They may always have been in place. The caps stem from asset protection laws, the limits on doctors’ insurance policies, and the economics of contingent fee litigation, which make it impracticable for plaintiffs’ attorneys to go after doctors’ personal wealth. These caps are hard. They apply to all elements of plaintiffs’ recoveries, including their economic losses, and they are rarely exceeded.
If people in our society focused on things that mattered, the debate over damages caps would end immediately. We already have them. Replacing it would be a debate over the amount of liability insurance doctors ought to carry and the possibility of creating other means of defraying injured patients’ losses. Many states, including Texas, have neither financial responsibility laws nor patient protection funds. In these states, doctors can carry as little insurance as they want. As seen, they often buy policies that are small. Although doctors complain mightily about malpractice insurance premiums, patients, their families, their first-party health insurers, and society at large absorb much or most of the burden of malpractice. An important question, rarely discussed, is whether health care providers and their liability insurers shoulder as large a fraction of the costs of medical malpractice as they should.

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Posted at 12:23 PM, May 23, 2007 in
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This is a perfect example of what is wrong with malpractice law. Look at the case in the first place. The reason for a balance and hearing test is obviously that there is a problem with hearing and balance. This test is part of that evaluation. A rare but often cause of these conditions is a disecting artery which the patient had. So because they had the problem, they sue because of the test not the fact that the patient had the condition to begin with that was ready to rupture. This is a classic example that there are bad things that happen and then someone is always to blame. Nevertheless, will the actual medical issues surrounding the event come into play. No. Who is the blame for a disecting artery, well lets see, it has to do with a congenitally weak artery, so the patient got it from their parents and it was just witing to blow. But lets look at the malpractice caps. These decrease the expenses paid by insurers an behalf of those who did nothing wrong because something bad happened to someone beyond their control. If the atery did not blow then, it might have blown at, lets say Wal-mart. Then we could blame it on them.

Posted by: Chris | May 23, 2007 12:55 PM

Prof. Silver: I have called for the boycott of lawyers by all service and product providers. Your anecdote lends support to this call.

The eggshell skull doctrine was invented out of thin air by a private lawyer, Prosser, in the Second Restatement of Torts, in the 1930's. You propose taking money from the care of other patients, including me and my child, to pay for your pre-existing vulnerability and condition. As a patient, I would have asked your hospital to fight your hypothetical claim to the death.

Your economics is off. When a lawyer dies, especially in mid-career, there is a tremendous net benefit to the economy. Let's say, a lawyer dies at 50. Let's say a lawyer may work to full effort to age 75. The premature death of that lawyer adds $25 million to the economy.

Let's look at the effect of the premature death of a law prof. The latter recruits and indoctrinates say, 100 students a year. Each destroys $1 million a year in economic value, with the skills imparted by the prof. Let's say, there are 15 courses in law school, and this prof teaches one. To take out a law prof 25 years prematurely yields this result: (25 years X 100 students a year) X ($1 million X 50 year students' career) divided by 15. The death of a law prof 25 years early yields a benefit of approximately $1 billion to the economy, by attenuating the damage done by his law students.

Posted by: Supremacy Claus | May 23, 2007 2:02 PM

Chris' comment is nearly incoherent, but I'll try to sort it out. I'll start with some points about my injury, then discuss litigation.

First, I didn't say the carotid artery dissection caused my balance disorder or even contributed to it. I have no evidence that it did and do not believe this to be so. Nor could Chris possibly have such evidence. My balance problem started 3 years ago. Neither he nor anyone else examined the condition of my carotid artery at that time. Chris may have misread my original post as suggesting a connection, but insofar as I know there is none.

Second, Chris asserts that my carotid artery was "congenitally weak." I can't imagine how he could possibly know this without examining me, studying my medical history, etc. The little I've read on dissections indicates that, excluding those caused by obvious trauma (such as a car crash), most are idiopathic, meaning their causes are unknown. Apparently, Chris substitutes "congenitally weak" for unknown, but there could be many other causes, e.g., hypertension.

Third, Chris assumes that trauma associated with the diagnostic test did not cause the injury. It is true that the test has been administered to many patients without damaging their carotid arteries, but my doctor told me that post-test headaches, induced by muscle strain, are common. In fact, he did not immediately follow up on my headache, which was severe, for that reason. He knew I’d injured my neck, but thought the problem was muscular, not vascular. That the test entails trauma is clear.

Fourth, there is an alternative way of administering the test (the “head lift method”) that applies no torque to the neck and that would not have injured me. An important question is whether the head life method should always be used. Given my injury and the frequency of headaches following the neck-twist method, this is arguably so.

Turning to ligitation, Chris has the relationship between injuries and lawsuits exactly backwards. I haven't sued anyone in connection with my carotid artery injury. (The discussion in my column is purely hypothetical, as the column makes clear.) In not having sued when I could have, I am like most Americans. Although the mantra (which Chris buys into uncritically) is that Americans sue whenever anything bad happens, the truth is exactly the reverse. Most Americans "lump it." We bear our injuries stoically even when others are potentially responsible. We don't sue our doctors, we don't sue Wal-Mart; we don't sue anyone. The main exceptions to this are automobile accidents and airplane crashes, where liability is often clear and norms of claiming are established.

Much of the evidence showing that Americans under-claim comes from studies of medical malpractice. As Paul Weiler, an author of the Harvard Medical Practice Study, observed, “the medical setting has provided the strongest evidence that the real tort crisis may consist in too few claims.” Paul C. Weiler et al., A Measure of Malpractice 62 (1993).

Posted by: Charles Silver | May 23, 2007 2:56 PM

Agree with the above. One point that plaintiffs and lawyers continually fail to grasp is that unfortunate outcomes sometimes occur in the absence of medical error. The recent Studdert study in the NEJM suggests a number close to 40 percent:


Posted by: Kevin | May 23, 2007 3:39 PM

Supremacy Claus (SC) has clearly gone over the edge, presumably driven there by the ideological conviction I noted when responding to a comment he (she?) posted on a prior column of mine.

First, there’s no evidence that I was an “eggshell” victim. It is remarkable that anyone would reach this conclusion without examining me or knowing the facts about my treatment. I am reminded of Bill Frist's "diagnosis" of Terri Schiavo. (I have not denied being an “eggshell” victim, by the way. In my column, I took no position on the facts.)

Second, SC’s assertion that lawyers burden the economy has been refuted pretty soundly. The evidence shows that the growth of a society’s lawyer population corresponds to the growth of its economy. This may be because lawyers promote economic growth, because economic growth generates greater need for legal services, or both. The one assertion that seems most clearly to be false, however, is SC’s charge that lawyers retard economic growth. For a review of the studies, see Frank Cross, Law and Economic Growth, 80 TEXAS LAW REVIEW 1737 (2002).

SC appears to be operating under the mistaken belief that most lawyers handle personal injury lawsuits. In fact, most lawyers work in the business sector, and it is in this sector that almost all the growth in legal services has occurred since (I think) the 1980s. The corporate/commercial sector is also the area where most of the growth in litigation has occurred. Personal injury lawsuits have been declining for years. Some data on litigation rates can be found at the National Center for State Courts’ website.

Third, SC’s warm-hearted assertion that my premature death would save the economy $1 billion by reducing the number of law school graduates rests on the singularly unwarranted belief that no one would be found to replace me in the classroom. I like to think I’m irreplaceable, but the truth is that loads of people would love to have my job.

Fourth, when it comes to burdening the economy, why isn’t SC railing against doctors, hospitals, and other health care providers? Health care costs have grown at an alarming rate, and continue to do so. They’re bankrupting individuals, companies, pension funds, cities, states, and the federal government. Also, the last time I looked, a lot of money was withheld from my paycheck and given to the medical industrial complex, but none was withheld for the benefit of lawyers. SC seriously needs a reality check.

Finally, there’s Kevin’s observation, supposedly supported by the Studdert study, that bad outcomes sometimes occur in the absence of medical error. Although no one denies this, Kevin’s misuse of the Studdert study is blatant.

For one thing, the Studdert study doesn’t address the frequency of bad outcomes in the absence of medical error; it addresses (among other things) the frequency of medical error in cases where compensation was claimed. These cases constitute a tiny fraction of the universe of unfortunate outcomes. By saying that the Studdert study found that only 40 percent of bad outcomes occurred without medical error, Kevin wrongly suggests that 60% of bad outcomes occurred with medical errors. That would imply an astonishingly high malpractice rate.

For another thing, the Studdert study supports me, not Kevin. It concludes (1) that plaintiffs’ attorneys evaluate cases carefully before filing them, and (2) that the biggest problem with the tort system is that it too often sends deserving patients home empty-handed. Its authors also support my observation above that under-claiming (not over-claiming) is a huge problem in health care. Here’s a lengthy quote.

“The profile of non-error claims we observed does not square with the notion of opportunistic trial lawyers pursuing questionable lawsuits in circumstances in which their chances of winning are reasonable and prospective returns in the event of a win are high. Rather, our findings underscore how difficult it may be for plaintiffs and their attorneys to discern what has happened before the initiation of a claim and the acquisition of knowledge that comes from the investigations, consultation with experts, and sharing of information that litigation triggers.

“Our findings point toward two general conclusions. One is that portraits of a malpractice system that is stricken with frivolous litigation are overblown. Although one third of the claims we examined did not involve errors, most of these went unpaid. The costs of defending against them were not trivial. Nevertheless, eliminating the claims that did not involve errors would have decreased the direct system costs by no more than 13 percent (excluding close calls) to 16 percent (including close calls). In other words, disputing and paying for errors account for the lion’s share of malpractice costs.

“A second conclusion is that the malpractice system performs reasonably well in its function of separating claims without merit from those with merit and compensating the latter. In a sense, our findings lend support to this view: three quarters of the litigation outcomes were concordant with the merits of the claim. However, both of these general conclusions obscure several troubling aspects of the system’s performance. Although the number of claims without merit that resulted in compensation was fairly small, the converse form of inaccuracy — claims associated with error and injury that did not result in compensation — was substantially more common. One in six claims involved errors and received no payment. The plaintiffs behind such unrequited claims must shoulder the substantial economic and noneconomic burdens that flow from preventable injury. Moreover, failure to pay claims involving error adds to a larger phenomenon of underpayment generated by the vast number of negligent injuries that never surface as claims.”

I seriously wonder whether Kevin actually read the Studdert study before posting his comment.

Posted by: Charles Silver | May 24, 2007 1:05 PM

When looking at carotid artery disections, it is important to look at why yours ruptured while others did not. The test that you had (an ENG) is a very common test yet there are not other cases that reach statistical significance of the carotid disecting during the procedure. Even in the most severe of whiplash injury it is extremely rare for a disection. It follows therefore that there was something different in your case, that being a weakness in the artery. This is most likely due to a problem with the arterial wall (intima). These problems include congential weakness (as these are seen spontaneously in teens), atherosclerotic disease from diet and lifestyle, and lastly from surgical manipulation. It must also be noted that carotid atery disection is very rare. It is usually diagnosed by angiogram which has a risk of cerebral vascular accident of 1%.

Now when we look at causes of neck pain after an ENG or other activities, the most common causes are musculoskeletal and nerve impingement. Therefore you had a extremely unlikely bad thing happen.

Now, the issue of malpractice is who is at fault or at least who is to pay. I don't know about you but I protect myself and family with disability and life insurance. As to the hypothetical nature of the case that you present, this is the mantra that people use to bring suit. The idea that people suffer quitely is true however as bad things do happen and most of the time they are not someone elses fault and the expert reviewer of the case has pointed it out when they have tried to sue. Again, that is why I choose to have insurance.

I personally am not a believer in caps. Rather, I believe that since there are bad things that do happen, it is essential to have a way to sort out what it negligence and what is "sierra hotel". I suggest formal review boards that also have the power to make recommendations to the standard of care so that we can improve overall medical care, punish those who are negligent and assist victims.

Oh, by the way, the "head lift" technique does not help diagnose sacule dysfunction and often leads to a non diagnostic test.

Another thing to consider is that microemboli from vascular problems often leads to problems with balance and hearing as patients may shower these for years. Rare, but part of this is congential collagen vascular problems that cause early weakening of the vessels.

You brought up your case to discuss maltpractice

Posted by: Chris | May 24, 2007 1:11 PM

Chris starts out right: It is important to know why I was injured when others were not. Much of what he says about carotid dissections also comports with what I’ve learned about them, although it is important to understand that I am not a doctor and profess no medical expertise.

Chris also appears to agree that most Americans bear most of their injuries quietly and without suing, although I find his prose a bit opaque. I’ll assume we’re in agreement on this.

Chris makes a potentially important point when he observes that in most lawsuits patients learn from expert reviewers that no malpractice occurred. Offhand, I don’t know whether most or many is the better adjective, but I do know that plaintiffs’ attorneys drop lawsuits like hot potatoes when negative reviewer reports come in. Plaintiffs’ attorneys can’t make money on these cases, so they withdraw from them. Claims about frivolous lawsuits take strategic advantage of the fact that people who experience serious bad outcomes have to sue to find out what happened to them.

Unfortunately, Chris goes off the rails at important points.

First, Chris thinks I had an ENG test. I did not. I had a VEMP test. The method of applying the test was also the neck twist method using a rubber ball. It is important to know this because there are several methods of administering the test. It is also important to know that, when I discussed the test with my ear doctor after my carotid artery dissected, I learned that he did not know the audiologist used a rubber ball when administering the test for the purpose of enabling patients to squeeze down harder. It may also be important to know that I am 6’5” tall and weigh—well, more than I should. My mechanics differ from those of people with more nearly normal bodies and may have contributed to the problem. My medical history may also matter, although I take no position on how or why.

Second, when it comes to VEMP tests, the head lift method produces more accurate results than the neck twist method. Here’s a quote from a webpage maintained by Dr. Timothy Hain, an expert on balance disorders and their treatment.

“Another (but bad) method of obtaining activation is to have patients sit upright with their chin turned over the contralateral shoulder to tense the SCM muscle. We don't think that this is a good idea because you have no way of knowing how much tension the patient is producing, it is tiring, and patients can do something different on the right than on the left, without you knowing. It is also well known that head position on body can change VEMP responses. This adds another variable.”
Thus, the head twist method of administering the VEMP test is dispreferred, and for a relevant reason: the tension produced may vary across patients, and the physican has not way of knowing how much tension a particular patient produces.

It continues to be remarkable to me how willing people are to stake out positions without knowing the facts. Judging from his (her?) most recent post, Chris seems exceptionally bright and well educated. Yet, Chris was too eager to reach a conclusion about the merits of my hypothetical malpractice case. I haven’t reached a conclusion myself, and I’ve lived with the injury for over two months. In these Internet discussions of tort reform, it seems to be a sin to utter the words “I don’t know.” In real life, of course, knowing that one does not know something is often important.

Third, I do carry disability insurance and health insurance, and I agree that these first party coverages are valuable ways of helping people defray the costs of serious, bad outcomes. Unfortunately, neither form of insurance protects fully against the consequences of medical errors. For example, my career (and therefore my future income) is suffering because my ability to work is impaired. Disability insurance doesn’t cover the cost of lost promotions and raises.

Finally, Chris suggests that professional review boards be used to sort out malpractice claims. Some states already use such boards to produce non-binding recommendations, and, if I recall correctly, an empirical study found that the boards are more pro-patient than civil juries are. For this reason, health care providers often rejected the boards’ recommendations and opted to try their cases. This result should not surprise anyone who is familiar with studies of malpractice litigation. Jurors love physicians.

Posted by: Charles Silver | May 24, 2007 3:09 PM

The above argument has been very stimulating.The situation in real life is certainly a tough one and i think this is because there are almost always important variables that needs to be proven beyond all shadow of doubt before an accurate conclusion can be reached.For example the most important questions which continues to loom over this case is: Was there a cause and effect relationship between the test and the complication you suffered or was it just a coincidence? Was there anything the doctor could have done to determine with reasonable certainty the probability of this injury occuring?
I think incontrovertible answers to these questions will go a long way to determine if you should get compensation for the the injury ( that is if you seek one )

Posted by: segun | June 4, 2007 3:01 PM