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Conflicts of Interest

There are two conflicts of interest inherent in malpractice insurance defense. The obvious conflict is between the defendant and the insurer. At the beginning of a lawsuit, defendants are interested in preserving their honor and paying nothing to the plaintiff. They want the insurance company to spare no expense in their defense. As the trial approaches, their resolve is frequently shaken by the emotional stress of the proceedings and the potential of a verdict that will exceed the limits of their policy. At this point, they will usually pressure the insurance company to settle the case rather than risk a trial.

The second conflict is between the defendant and the universe of insureds not being sued. It is the premium dollars of these insureds that the defendant wants spent on his or her representation. This was not a problem when medical malpractice insurance was both inexpensive and available. In today's market, it increases the cost of insurance, thus reducing its availability.

The consequences of allowing individuals unfettered access to a limited resource were effectively described in an essay by Garet Hardin entitled "The Tragedy of the Commons." Hardin dealt with grazing sheep on ground held in common by a community. Each individual sheep herder can maximize his or her income by grazing as many sheep as possible. The common ground, however, has a limited carrying capacity for sheep. If too many sheep are allowed to graze on the common, the grass is destroyed and all the sheep herders starve. Individual sheep herders, if left to pursue their own interests, will eventually destroy the commons and their own livelihood.

In today's market, medical malpractice insurance is a limited resource. Each time an insurer raises its rates or restricts the availability of coverage, some physicians are driven out of independent practice. Physicians who are not priced out of private practice must modify the nature of their practice to accommodate the cost or restrictions on their insurance. Each unnecessary dollar spent on claims management has an adverse impact on every physician insured by the company.

An insured who holds up the settlement of a case increases the cost of managing that claim. Interestingly, the insured is almost never successful in forcing a trial or affecting the terms of the judgment. All he or she can do is generate substantial extra legal fees until such time as he or she is persuaded to settle. Conversely, an insured's willingness to settle a case that the insurer wants to defend may weaken the insurer's case, but it has little ultimate effect on the management of the case. In each case, the insured is expending community resources for little or no personal gain.


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