Page 4 - SFHN October 2021 Issue

Malpractice Insurance

EXPERT ADVICE

Why Professional Liability Insurance

Premiums Continue to Rise

BY VANESSA ORR 01, the average claim pay-
ment was $250,000, which
As if the past couple of is what the average physi-
years haven’t been difficult cian carries in liability,” said
enough, physicians are Murphy. “In 2020, that aver-
now starting to feel the age was over $400,000.
pain of medical profession- Other factors affecting
al liability rate increases. these lawsuits and the con-
“Major carriers are really current rise in insurance
concerned about current rates include social inflation
rate adequacy,” explained and the rollback of tort
Medical Malpractice and reform in many states,
Workers’ Compensation including Florida.
Specialist Tom Murphy at Tom Murphy “Everyone now has social
Danna-Gracey, the largest media, and large settlements
medical malpractice insurance agency in and jury awards have become common-
Florida. The company recently merged place,” said Murphy. “When a claim pay-
with Risk Strategies, one of the top 20 ment is made for $10 million, the average
insurance brokerages in the country. Joe thinks nothing of it. It has really
“Unlike other forms of insurance, med- changed people’s attitudes and beliefs
ical professional liability is based on his- about entitlement for compensation
toric claim and loss trends, but because it injuries and losses, and their willingness to
can take five years or more to settle a pursue litigation. In the past, they were not
claim—and this can be different in every so quick to pull the trigger.”
state because of statutes of limitations— Before tort reforms were rolled back,
they don’t know if the rates they set today there were limits on judgements, but now
will be correct,” he added. “Until they see “shock” awards are more commonplace,
how claims play out, and what they need especially with the proliferation of class-
to pay out, they don’t know what their action lawsuits.
reserves should have been.” “Reptilian brain theory, which is a tactic
Murphy explained that insurers look at used in jury trials to activate a juror’s sur-
the combined ratio, which includes all of vival instincts, is being used more often by
their expenses, such as management costs lawyers to induce fear in order to over-
and claims payments, to determine what come logic and reason,” said Murphy of
premiums should be. “If the combined these massive awards. “The goal of saying
ratio is 100 percent, for every dollar they that a doctor is a danger to the community
take in, they pay out one dollar,” he said. and patient safety, for example, is to create
“If that number is over 100 percent, they verdicts to punish, instead of compensate.
are losing money.” It gets the jury angry, and they come back
In 2020, medical professional liability with larger verdicts.”
carriers were working at a 118 percent He adds that third-party litigation
combined ratio, so they began raising financing, in which private equity firms
rates. Those who didn’t plan well have finance law firms in their litigation and
raised rates dramatically—in some cases, then receive a cut of the award, is also
up to 50 percent. Companies who antici- growing. “This incentivizes lawsuits,
pated this issue began raising rates incre- which is a dangerous trend,” said Murphy.
mentally about three years ago by about 5 A trend in increased defense costs has
percent each year; something Murphy says also resulted in premium increases; in
that these companies will need to continue 1991, defense costs averaged about
to do while the market is on a downward $200,000 on closed claims; that number
trend. has increased to $1.2 million.
With the exception of 2021, the past “While none of this is good news, the
four to five years have seen an increase in best way for physicians to weather the
lawsuits, as well as in the amounts award- market is to look for higher ground—to
ed to plaintiffs. stay with A-rated AM Best companies that
“Because of COVID, 2021 saw a have lasted through all the ups and downs,
decrease in lawsuits, but this is an anom- and who defend their physicians,” said
aly; lawsuits are expected to accelerate Murphy. “You may pay a little higher pre-
again once courts are back in session,” said mium to be with a better company, but
Murphy. “Right now, companies don’t they’ll be there when you need them.”
know what the final outcome of claims rel-
ative to the pandemic will be.” To contact Danna-Gracey, a Division of
Paid indemnity, or what carriers have Risk Strategies, call Tom Murphy or Matt
had to pay on average, has increased con- Gracey at (800) 966-2120
siderably over the past two decades. or visit www.dannagracey.com.
“Before the last hard market hit in 2000-

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4 October 2021 southfloridahospitalnews.com South Florida Hospital News