How Medical Malpractice Settlements Work

Medical malpractice lawsuits don't settle with quite the same frequency as personal injury cases, and the process can be more complicated. The doctor or other health care professional being sued often has the final say on approving or rejecting a proposed settlement, and malpractice insurers might be more willing to play hardball and take a case to trial, compared with other kinds of insurers. In this article, we'll describe the settlement process in medical malpractice cases and what sets these claims apart.

Negotiation of a Medical Malpractice Settlement

As with settlement in any kind of civil lawsuit, the actual dollar amount of a medical malpractice settlement is negotiated between the plaintiff and the defendants (often through or at least alongside the defendant's malpractice/professional liability insurer). The injured patient's damages are often the starting point for settlement talks.

Economic damages, meaning quantifiable, provable expenditures or losses—like the cost of additional treatment made necessary by the health care professional's medical negligence—can be relatively easy to calculate. Where the real negotiation takes place is typically with non-economic damages. A plaintiff's idea of appropriate compensation for things like pain and suffering and loss of enjoyment can be vastly different from a doctor's or an insurance company's valuation.

State laws limiting damages awards in medical malpractice cases may also come into play, to the extent that a malpractice/liability insurer will have these caps in mind when negotiating toward a final number.

Doctor's Approval of a Medical Malpractice Settlement

When a doctor or other health care professional is facing a medical malpractice lawsuit, their approval must usually be obtained before a settlement can be finalized. In contrast (and as a general rule) settlements for slip-and-fall or car accident cases can simply be settled by a defendant's insurance company, regardless of the defendant's wishes.

There are numerous databases and state reporting repositories that track medical malpractice settlements. As a result, these settlements don't carry the same level of confidentiality that others often do. This has a direct and often significant effect on the cost of a practitioner's malpractice insurance, so doctors often have the final say on settlement.

A physician may want to take his chances at trial rather than settle, instead of risking grossly inflated insurance premiums or being dropped by his insurance carrier. Furthermore, many doctors refuse to look at malpractice cases in a dispassionate matter, and if they feel they have not committed malpractice they will fight tooth and nail to attempt to prevent a plaintiff from recovering anything.

Professional malpractice/professional liability insurance companies also tend to take a hard line on settlement. These companies may have "unofficial" policies that favor trying cases as oppose to paying out settlements. Medical malpractice insurance is a high stakes game, and insurance companies sometimes want to promote the perception that they are hardliners, in an attempt to discourage litigation against their insureds.

Once a settlement is negotiated and approved by the parties, it's often necessary to obtain court approval, particularly in cases involving minors. This is to prevent settlements that may be designed to provide quick payouts at the expense of actually providing for long-term financial needs.

Payment of Medical Malpractice Settlements

Depending on the plaintiff's age, the laws of a particular jurisdiction, and the nature of a plaintiff's injuries, medical malpractice settlements may be paid in a lump sum, in a structured settlement, or through a combination of the two.

Some states don't allow insurance companies to pay for future costs of medical care over time, favoring a lump sum approach instead. Others prefer a more monitored, pay-as-you-go system. In the case of minor plaintiffs, courts will often require structured settlements that are designed to cover current medical expenses with a payout once the minor reaches the age of majority.

The payment and collection of settlement amounts is often negotiated concurrently with the actual dollar values, and insurance companies will often look to discount an overall settlement in exchange for quick payment.

The settlement check is typically sent to the plaintiff's attorney, who will deposit it into an escrow account. After subtracting case expenses and legal fees per the representation agreement, the plaintiff is paid.

If you're thinking about filing a medical malpractice lawsuit, your lawyer will offer guidance on the most effective route to a reasonable (and timely) settlement. Learn how to find the right lawyer for your medical malpractice case.