Matt Gracey, Managing Director, Risk Strategies / Danna-Gracey
By Vanessa Orr
While ‘Consent to Settle’ clauses in malpractice insurance policies are rarely discussed, these little-known endorsements that are part of the language of the policy are actually one of the contract’s most important parts. Consent to Settle lays out the terms of the policy, outlining how a settlement offer or settlement provisions will be handled by the insured and by the insurance company.
“Until about 10 years ago in Florida, by law the malpractice insurance companies couldn’t give an insured the right to consent to settle. It was illegal because of politics,” explained Matt Gracey, Managing Director, Risk Strategies / Danna-Gracey. “That law was changed, and a number of standard market malpractice insurance companies in Florida offering malpractice insurance coverage have now amended their policies to include various Consent to Settle provisions.”
There are, however, a wide variety of Consent to Settle clauses found in malpractice insurance policies. On the more favorable side is “pure consent language,” which means that the insurance company will not settle any claim against the insured without their permission to do so. On the flip side, a “hammer clause” says that if the insured doesn’t consent to the settlement that the insurance company advises them to make, then the insured must pay all future defense costs, and sometimes any settlement above what the insurance company originally recommended.
“Hammer clauses are very unfavorable because an insurance company can demand a case be settled even if it has no merits,” said Gracey. “Some insurance companies are financially fragile, so they don’t want to spend the money to defend doctors. They’d much rather settle the case and save the defense costs or the risk of having a very large trial verdict.
“However, in order to protect their reputations, most insured doctors don’t want anything other than pure or nearly pure Consent to Settle clauses in their malpractice insurance policies,” he added.
In addition to hammer clauses, there are other ways that doctors can lose consent authority. These can include language in the contract about what happens if the doctor’s license is suspended, if he or she dies or is declared incompetent, if they move out of state, or even if they are no longer insured with the company that is handling the case. There may also be board approval language in the policy that says that if the insurance company board or review panel decides that they want to consent and the doctor doesn’t, they can force the doctor to consent.
“It can even be as vague as to say that if they deem a doctor to be unreasonable in withholding their consent, the doctor loses consent authority,” said Gracey. “There are a huge variety of ways in which insurance companies limit doctors’ abilities to consent or not consent to a settlement.”
In fact, one of the most common complaints – besides price – that doctors have is that insurance companies settle cases that are defensible.
“Most doctors want their cases vigorously defended; in the vast majority of cases, there may be little to no liability, but just an attempt by patients and plaintiffs’ attorneys to hope the company settles instead of going to a costly jury trial,” said Gracey.
Standard admitted companies most often have the best Consent to Settle clauses, whereas excess and surplus lines policies generally have the worst, notes Gracey, adding that the clause can be found in the definitions section of an insurance policy or in the policy language.
“Like everything surrounding malpractice insurance, we advise doctors to find an expert who specializes in these policies so that they can get good advice and ask the right questions,” said Gracey.
For more information, contact Matt Gracey at (800) 966-2120 or visit www.dannagracey.com.
