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Doing the Math on Medical Malpractice: Deciding When to Defend or Settle

Settlement discussions related to medical malpractice lawsuits can be every bit as complicated as the patient’s underlying medical issues. Most healthcare providers are initially opposed to any discussions of settlement, often because of misconceptions about the actual legal implications and consequences of a settlement. Just as in medicine, it is only with proper informed consent that a decision on settlement can be made. The decision of whether to settle a case is deeply personal, should be ultimately made by the individual clinician (with the assistance of appropriate legal counsel), and must be reported to the National Practitioner Data Bank (NPDB).



The authority to settle a legal case is determined by the language in the professional liability insurance policy known as a “consent clause,” which dictates that settlement money cannot be paid by the insurance company unless the named individual agrees to that payment. Usually, the holder of the consent is the individual clinician who is allowed to make his/her own decision on the matter.
However, there are exceptions. For instance, it is not uncommon when a physician is employed by a practice group or hospital for the employing entity to hold the power to consent. In these circumstances, the entity can consent to settlement or withhold consent, even if it conflicts with the wishes of the clinician whose care is at issue. When the insurance carrier is given consent, a legal duty for the insurance company is triggered. Insurance carriers are not obligated to accept outrageous demands from plaintiffs’ counsel, or to even make settlement offers, as long as their conduct is reasonable under the specific facts of the case. However, if there is a jury verdict that will exceed the limits of the policy, the clinician may have a potential cause of action against the insurance carrier for the amount of the excess. For this reason, some clinicians will choose to consent, even if reaching a settlement agreement seems unlikely.  


1. Evaluation of Legal Aspects of the Case.

Litigation is, by definition, uncertain. When it comes to a jury trial, no lawyer can promise an outcome any more than a clinician can promise the patient a favorable result. There are a variety of factors that may impact the defensibility of a case that are independent of standard-of-care issues. The venue, trial judge, opposing counsel, co-defendants, experts, documentation, and individualized facts of the lawsuit can make a trial risky, even when the actual care provided is very defensible. For these reasons, it is important to carefully consider the evaluation of an attorney. In some cases, it may even be worthwhile to retain personal counsel to get a second opinion on the evaluation of the legal issues.  

2. Evaluation of the Plaintiffs’ Damage Model.

The calculation of risk starts with an evaluation of the plaintiff’s damage model and the amount of insurance available. Many states, including Texas, have a legislative cap on the amount of noneconomic damages that a plaintiff can recover. In Texas, the cap is $250,000 for any clinicians who have been sued, with an additional $250,000 cap for each hospital sued (up to two hospitals) or $500,000. This leads some clinicians to incorrectly conclude that if they have an insurance policy that exceeds the amount of their cap they cannot be held personally liable in the event of an adverse verdict. Unfortunately, this is untrue. The cap only applies to noneconomic damages, such as pain and suffering. It does not place a limit on the amount of actual economic damages, such as medical expenses, lost earnings, life-care needs, or loss of household services. In a case where a high-income earner is unable to work, or where an individual is severely disabled, the economic damages could be several times the noneconomic damage cap. Therefore, a clinician could be personally responsible for a verdict that exceeds the available insurance by millions of dollars. It is not difficult to understand why a clinician who is very comfortable with his/her patient’s care might still make the business decision to settle a case within the policy limit to avoid the risk of an excess verdict.  


The settlement of any malpractice case can have long-term consequences for practitioners. Any settlement paid on behalf of a clinician by an insurance carrier will have to be reported to the NPDB, a web-based repository of reports containing information on medical malpractice payments and certain adverse actions related to healthcare practitioners that are reviewed by hospitals during the credentialing process (when privileges are renewed or for new applications). The respective state’s medical board will also receive the information and can investigate the clinician. (Having multiple settlements is a red flag.) There are potential emotional consequences as well. Some clinicians later regret the decision to settle a case, especially if a decision was reached without expressed consent. The reporting requirements for credentialing can also serve as regular reminders of the event having long-term negative effects. Insurance premiums can also be affected, and, in some cases, an insurance carrier may drop the clinician. However, as settlements are common within the field, a clinician is unlikely to face strong repercussions from a settlement, unless it is for an unusually large amount (or if there is a pattern of settlements). Further, a well-written letter from the clinician’s attorney can be used for future credentialing purposes to help place the settlement into context.  


As with individual patients, each malpractice case is unique and should be evaluated individually. However, certain generalities can be taken from case studies to evaluate the factors that lead clinicians to settle. We will look at two very different patient examples from the standpoint of the wound care clinician. The first example is a very common patient seen by wound care clinicians and in litigation. The second example is a more rare and more extreme example of an unfortunate deterioration of a patient.  

Case Study No. 1: 92-Year-Old Nursing Home Resident (Texas)

The patient lived with severe dementia, morbid obesity, and diabetes. She experienced a ruptured abdominal aortic aneurysm and underwent emergency surgery after receiving CPR in the emergency department. She had a complicated course of sepsis and renal failure in the intensive care unit, and remained hypotensive for several days, requiring vasopressors. Her buttocks were examined three days after surgery, at which time she was noted to have a “deep tissue injury (DTI) over the buttocks and sacrum,” which evolved into a stage IV pressure ulcer. The wound was slowly improving with negative pressure wound therapy when she died in the nursing home, eight months later. The death certificate listed the cause of death as “sepsis due to pressure ulcer.” The family sued the nursing home, the hospital, the vascular surgeon, the intensivist, and the wound care physician, claiming wrongful death and negligence. 

First, the damage model is examined to determine the potential exposure to the wound care physician. Due to the age of the patient and her chronic illnesses, there were no lost wages, no lost household services, and no loss of inheritance. Most of the medical expenses were related to the chronic and acute medical conditions of the patient, so the medical bills directly attributable to the wound care services are approximately $20,000. The noneconomic damages are capped under Texas law, which leaves potential exposure of $250,000 for the nursing home, $250,000 for the hospital, and $250,000 potentially apportionable amongst the three physicians. The wound care physician has an insurance policy with a $500,000 limit. Given the numerous comorbidities and advanced age, the patient was predisposed for pressure injury. With reasonable documentation of the care provided and a discussion of the nature of DTIs, it becomes a reasonable decision to defend this action. The total potential exposure is $270,000, so any potential judgment would be covered by the policy of the wound care physician. This is especially true given the probability that any potential adverse verdict would be apportioned amongst the other physicians. Thus, an early settlement is unlikely. It is more probable that the defense attorneys representing the healthcare providers will pursue written discovery and depositions in order to strengthen their positions. However, a reasonable, limited amount will likely be entertained to avoid the uncertainty of trial.  

Case Study No. 2: 52-Year-Old Male (Texas)

The patient, a corporate sales executive with a history of poorly controlled diabetes, obesity, peripheral vascular disease, multilevel disc herniations with impingement, peripheral neuropathy, and severe back pain, presented for a three-level spinal fusion. Postoperatively, he complained of severe lower back pain and required high-dose narcotics. He experienced numbness to his lower extremities and recurrent episodes of diarrhea. Physical therapy was not initiated for the first three days postoperatively due to his inability to participate. The nurses incorrectly assessed him as “low risk” for pressure injury and thus did not implement pressure prevention protocols. Four days postoperative, the patient developed a DTI over the sacrum, which was incorrectly assessed by a nurse as a stage I pressure injury. The orthopedic surgeon and the internal medicine physician failed to document or provide orders for the injury for the next three days, until the patient developed new stage II injuries to his heels and buttocks. A wound care physician was then consulted, who saw the patient immediately and wrote appropriate orders for pressure relief and other mitigating strategies. However, the notes were brief and contained little description of the wounds or thought process. The nurses’ documentation of the ordered care was sporadic and poor. The sacral wound eventually progressed to a stage IV and became colonized with Methicillin-resistant Staphylococcus aureus (MRSA), as well as several other organisms. The patient also had a urinary tract infection with MRSA. He became septic, coded, and was revived, but experienced a severe neurological injury. The hospital, internist, orthopedic surgeon, and wound care physician are sued. When deposed, the hospital nurse testifies that pressure injuries were “never events” and agrees that “not documented” means that the care was “not done.” The attending and the surgeon testify that they deferred all decisions relating to the treatment of the infected wound to the wound care physician. 

Once again, we start with the potential damage model here. This patient is a high-income earner who, due to his neurological injury, is no longer able to work. An economist places his lost earning capacity at $1.7 million. The patient’s wife testifies that he was very active in the performance of household chores, which the economist estimates would be valued at $350,000.  The paid medical bills related to wound care, sepsis, and neurological injury total $260,000 to date. His projected future medical care is $4.8 million, which brings his total economic model to $7.11 million. With the noneconomic damages capped under Texas law at $250,000 for the physicians, the total potential exposure for the wound care physician is $7.36 million. The wound care physician has a policy of $200,000, which is very common. It is likely that any potential adverse verdict would greatly exceed the policy limits, exposing the physician’s personal assets. This is true even if a jury were to apportion only a small percentage of fault. For example, a nominal finding of 5% would still result in a financially devastating verdict of $368,000, making the doctor personally responsible for $168,000. Thus, it would be a very rational business decision for the physician to settle within the limits of his policy under these circumstances, even if the underlying treatment by the physician was within the standard of care.  

Many times, the defensibility of a case is damaged by factors outside that individual’s control. In the present example, the wound care physician’s case is hindered by the poor documentation and testimony of the nursing staff. Further, the actual DTI predated his involvement, including the failure to implement preventive measures and the delay in the initiation of treatment.  Additionally, the plaintiff’s expert opines that the “progression” of the DTI to a stage IV pressure ulcer was due to poor care rather than the natural evolution of a DTI, which occurred before the wound care physician saw the patient. Finally, the very unfortunate downturn of the patient’s condition occurred after the involvement of the wound care physician. Sepsis was likely due to the urinary tract infection, since there is no evidence that the wound was actually infected (eg, a tissue biopsy or abscess). It is more likely that the wound was colonized with bacteria, which also colonized in several body areas. The numeric nature of the pressure ulcer staging system leads jurors to believe that pressure ulcers progress through the stages due to lack of proper care. Photographs of the ulceration are disturbing. The hospital has many documents labeled “pressure ulcer prevention protocols” that send jurors the message that pressure ulcers should be preventable and that their development is a priori evidence of a failure of care. In this case, although the other physicians bear more responsibility for these unfortunate events, it is not difficult to understand why a wound care physician would reasonably consent to settlement even though he or she may feel confident that they met the standard of care.


While there are consequences to the clinician for any settlement, these can be mitigated. One of the most common misconceptions is that a settlement is somehow an admission of fault by the clinician. It is not. Any settlement agreement, which is signed by all parties, dictates the terms of the settlement and should include clear language that the settlement was to buy peace, avoid the uncertainty of litigation, and that the clinician involved expressly denies any wrongdoing.  Another common concern is that the settlement amount or facts of the case will be publicized. Due to the internet, the ability of patients to reach a mass audience with their personal, often inflammatory, versions of events has dramatically increased. For this reason, a tailored confidentiality clause in the settlement agreement can provide harsh legal consequences to a plaintiff who attempts to disclose the amount of settlement or publicize facts of the case.  


Decisions about the settlement of a medical malpractice action can be impaired by common misconceptions about the implications of settlement. A settlement is not an admission of fault, but rather should be a rational business decision. The decision process should be based upon an evaluation of the potential legal exposure, the damage model, and the amount of insurance coverage. Settlements have potential long-term implications, but they can be mitigated by the terms of the settlement agreement.

Don Stephens is an attorney who has a broad base of legal experience and who has represented hundreds of physicians and other healthcare providers across the state of Texas. He primarily focuses on defense of medical malpractice allegations, but also handles a variety of healthcare issues. He may be reached at

Don Stephens, Esq.
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