In most medical malpractice cases, the physician is insured. A condition of this insurance is that the insurance company pays for the defense of a case. This benefits the insurance company because it is mostly its money that is at risk. It benefits the physician because attorneys are expensive, and a principal reason for buying insurance is that it pays defense costs. The problem is that the defense attorney represents the insurance company, not the physician. This becomes obvious when the potential recovery is substantially larger than the coverage provided by the insurance policy. If the insurance company misjudges the case, the physician also pays. The physician can also suffer if the insurer wants to settle a case to reduce their risk, but the physician did not commit malpractice. This may be a valid business decision for the insurer, but it can hurt the physician because it must be reported to the National Practitioner Databank. In these situations, physicians should retain their own attorneys to ensure that the insurance company protects their interests as well as its own.

The most serious potential for conflict arises in self-insurance trusts administered by hospital or other medical care employers. Even when these trusts are properly constituted and supervised, they have limited assets. This is most serious in smaller facilities and single hospital trusts. Since the medical malpractice litigation risk for hospitals and their employees and physicians is not independent—factors such as adverse publicity increases everyone’s risk of being sued—there is a chance that the plan will go broke, leaving the insured without coverage. If the plan is not properly organized, the risk of insolvency is much greater because of the temptation to use the funds for other purposes when the institution is in financial trouble. In some cases the medical care practitioner’s interests and that of the employer conflict, such as when the medical care practitioner is a whistleblower who was attempting to prevent the patient’s injury. In these situations, the employer may use threats of termination of coverage to coerce or punish the insured. Even when the pressure is not direct, the employer is often a big client of the defense firm and the firm cannot avoid pressure to favor the employer over the insured when there are conflicts. Ideally, medical care practitioners should have their own insurance rather than being tied to an employer- controlled plan. If this is not possible, and the medical care practitioner suspects a conflict, it is a good idea to hire a private attorney to monitor the defense counsel.