The Role of Private Counsel in a Medical Malpractice Case

You have been sued for alleged medical malpractice. However, your professional liability carrier has appointed and will pay for a defense attorney to represent you. The case progresses, but one day you are advised — by your carrier, defense attorney or colleagues — to seek the advice of private counsel at your own expense. The following are scenarios in which this may be worthwhile.

Claims for Punitive Damages

One of the most common reasons your carrier will advise you to seek private counsel is that the plaintiff made a claim for punitive damages. Because an insurance carrier is prohibited by law from paying punitive damages, the carrier must disclaim and advise you to seek private counsel. Awarding punitive damages in medical malpractice is virtually unheard of in New York because the threshold to grant punitive damages is very high. There must be spite or malice, a fraudulent or evil motive, or such a conscious and deliberate disregard of the interests of others that the conduct may be called willful or wanton.

Bad Faith Doctrine

The classic scenario is one in which a demand is made to settle within the policy limits and the physician wants to settle, but the carrier refuses. For the Bad Faith Doctrine to apply, liability must be clear and the potential recovery must far exceed the insurance coverage. If bad faith is established, the carrier’s policy limits no longer apply.

If liability is not clear (i.e., the care is defensible) or the award is not likely to exceed policy limits, there is no bad faith on the part of the carrier refusing to settle. Often, this is the case when the physician wants to settle and the carrier does not. In such circumstances, a bad faith letter is unnecessary and will not be effective.

Uncovered Claims

Plaintiffs will sometimes plead claims that are not covered by insurance. Under New York law, this presents a conflict of interest to the carrier-appointed defense attorney whose duty to the insured requires that he defeat liability on any grounds and his duty to the insurer requires that he defeat liability only upon grounds which would render the insurer liable. Under such circumstances, the physician has the right to an attorney of his/her choice to replace appointed counsel at the carrier’s expense.

This can happen when a physician is sued as both the attending physician and the medical director of the facility. The former claims would be covered by the physician’s professional liability insurance while the latter are not. The defendant could fall on his sword and admit liability for the attending physician claim covered by insurance in order to escape personal liability for the uncovered medical director claim. Needless to say, this is not a position the carrier wishes to be in, and it may provide private counsel with leverage to effect a settlement.

Informal Mediation

The last significant role for private counsel is to informally mediate a settlement. Private counsel can engage in shuttle diplomacy to effect a settlement between the parties. Like a mediator, private counsel is often privy to opposing counsel’s positions and can sometimes find the common ground necessary to affect a settlement.

Article originally appeared at: MD News May/June 2016, Central New York Edition

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