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Malpractice Insurance dilemma -- will higher policy limits raise my risk?

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  • Malpractice Insurance dilemma -- will higher policy limits raise my risk?

    I am a physician in Florida, where the statutory minimum malpractice policy is $250K/$750K per incident/annum. This seems to be the amount carried by most of my colleagues. I realize that malpractice awards may easily exceed this limit, so I am wary about my own personal exposure. I could afford to carry higher limits (say, $500K/$1.5M), which would give me some peace of mind, but I am concerned about becoming the "deep pockets" in a suit that might involve other physicians or corporations, and therefore increasing my chance to be the focus of litigation in the first place. Are there any opinions how these competing factors balance out?

    As for asset protection, my accounts are appropriately titled, etc, but my wage stream would be vulnerable to garnishment -- no kids, so I can't claim head of household, which would otherwise exempt wages.

  • #2
    Until a lawsuit is filed, an attorney will not know the limits of your malpractice coverage. As such, you are not a bigger target.

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    • #3
      Once an action is underway, don't you think having $1M versus $250K in insurance will influence who the opposing counsel focuses on or drops? In Kirwan's book "The Asset Protection Guide for Florida Physicians," he describes typical strategies of plaintiff's attorneys to "sue everyone involved," and then whittle down the lawsuit from there depending on who is more able to pay a large settlement or judgment.

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      • #4
        But then you have to look at the cost of the additional insurance compared to the cost of asset protection planning/ potential loss of control of some of your assets.

        If your estate planning works hand in hand with your asset protection plan, I think it makes sense. Otherwise, spending thousands of dollars, for something that may or may not happen may not make sense.

        More physicians lose more money to divorce, bad investment decisions and bad real estate than they will due to a malpractice claim.

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        • #5
          Papaya,  What is your specialty?  Those are low limits.  I am doing just gyn now but I have higher limits than those.  Depending on your field it is hard not to be paranoid but plaintiffs generally settle for your limits if you lose at trial.  I would agree that you become the target if it is known you have deeper pockets. I once went to an Ob meeting on malpractice issues were a plaintiff attorney spoke.  He said he never sued nurses unless he knew they had malpractice insurance.

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          • #6
            Attorneys arent suing doctors, they are suing your insurance carrier, you are just the example case being made to explain why they get their money. I had heard in Florida one can go without malpractice insurance if they had sufficient net worth? Limits certainly are low in this case.

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            • #7
              Again, this whole asset protection thing, while very important is a bit overblown. Yes mostly plaintiff settle at your insurance limit.

              Second thing I didn't realize but have read about in the past week (and I don't really feel like digging up that thread on this) is that some states are just super friendly when it comes to asset protection.

              Direct question to LBKCLU: why would you pick an FLP if lets say in Texas you can form an LLC and only remedy is charging order? This is purely from asset protection point of view (I am sure there are benefits in FLP of estate planning and tax)

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              • #8
                I think the best answer to this is from asset protection attorney Daniel Rubin - "Few state statutes provide that the charging order is an exclusive remedy, however, thereby making foreclosure of the physician's interest in the entity a real possibility. Moreover, even where the charging order is an exclusive remedy, most state laws require a "business purpose" for a valid limited partnership or limited liability company to exist, and pure "asset protection" might not be deemed a valid business purpose".

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                • #9
                  Well the business purpose of a llc in a real estate would be investing in real estate. That's business enough and could be successfully argued.

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                  • #10
                    Yes, that one is fairly simple. The only caveat is if you set it up and under capitalize it or drain it of all equity to then dissolve it, which makes the formation appear totally for asset protection and not business purposes. So the prudent thing to do (from both an asset protection and business function standpoint) is make sure you have the biggest umbrella policy possible for it from the get go, at that point you've basically done what you can to cover any standard issues and it doesnt look like a front, which it most often is not.

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                    • #11
                      Sure I mean that makes sense.

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