The medical professional liability (MPL) insurance market in the United States is transitioning from soft to hard market conditions. According to the 21st annual addition of the Aon/ASHRM Hospital and Physician Professional Liability Benchmark Analysis, the frequency of MPL claims has remained stable over the past few years, but the severity of claims is climbing annually, which is causing insurers to reassess their portfolios and tighten up their underwriting guidelines.
Aon actuaries forecast in the report that MPL loss rates are increasing by 3% annually, compared to 2% in the past few years. One of the factors driving the increase in claim severity is the rise in frequency of high and sometimes “nuclear” - defined by Trans Re in the Aon/ASHRM report as verdicts at the threshold of $10 million and higher - medical malpractice jury verdict awards.
According to TransRe senior vice president Richard Henderson, who penned ‘An Overview of Medical Malpractice Verdict Awards’ for the MPL Benchmark Analysis, the frequency and severity of verdicts greater than $10 million has been the highest since 2016, despite a decline in the proportion of claims going to trial in the past 20 years.
“That is a very worrisome trend,” commented Kanika Vats, director of the healthcare actuarial practice for Aon Global Risk Consulting, and it’s something that is concerning insurers and medical professionals countrywide. Vats added: “Whereas in the past, plaintiff law firms typically operated in the urban centers, now they’ve started going into the more rural areas and they’re targeting rural hospitals. No-one is immune to these trends.
“We do have some jurisdictions in the United States where the tort environment has always been plaintiff friendly, but from the standpoint of MPL jury verdicts, even states outside of these high-cost jurisdictions are seeing large jury verdicts being awarded to plaintiffs.”
Henderson proposes a few reasons why the proportion of claims going to trial has been falling in his analysis, including the increasing cost of litigation from the plaintiff’s perspective, which he said “makes certain claims unrealistic to pursue from a cost-benefit basis.” He also pointed towards initiatives enacted in certain states, such as enhanced alternative dispute mechanisms, that are designed to more efficiently mediate and resolve claims, while also reducing judicial backlogs.
“As the severity of jury verdicts increases, we’re seeing many providers trying to resolve claims early. They’re trying to resolve MPL claims before a suit is filed and before it moves to the trial phase,” Vats told Insurance Business. “Another way they’re mitigating costs is by making high/low agreements with plaintiffs prior to trial, so that if a jury verdict comes in below the floor or above the cap, both sides will honor the sum determined in the high/low agreement. There’s also a school of thought that says defendants, if a claim goes to trial, should be presenting their number and making a strong case for why it is a fair and reasonable settlement amount, rather than just trying to fight the number the plaintiff attorney puts out.”
Jury verdicts for MPL claims have been trending unfavorably since 2016, and had 2020 been an ordinary year, there were no signs of that trend turning around. However, the COVID-19 pandemic has thrown new and unprecedented challenges on the medical profession and society as a whole. With many courts forced to close due to pandemic-triggered ‘stay at home’ orders, fewer cases have gone to trial this year, potentially leading to some false positives in claim and jury award statistics.
“Throughout the COVID-19 pandemic, medical professionals have been treating patients with the virus at risk to their own lives,” said Vats. “Will that sway jury sentiments towards more favorable outcomes? Only time will tell. And we’re going to have to wait because some state courts were closed for months, and now they’re trying to re-open and resolve cases virtually, but there’s a big backlog in the court system and criminal cases are going to get precedence over civil cases.
“While it’s more common these days for healthcare providers to negotiate with plaintiff lawyers and reach settlements, there will always be cases that are not settled via negotiation, remediation or arbitration. And if they do proceed to trial, we’ll have to see how the jury verdicts trend [amid the COVID-19 pandemic] and in the years to come.”