Professional liability claims affect many fields, including legal, medical, financial, and insurance sectors. Claims related to malpractice, breach of contract, and fiduciary duty can lead to significant premium increases and professional disciplinary actions.
In the medical field, malpractice premiums have seen alarming increases. According to the American Medical Association (AMA), premiums nearly doubled from 13.7% in 2018 to 26.5% in 2019. By 2022, 36.2% of premiums had risen. Key factors driving these costs include substantial claims leading to larger payouts, rising legal fees, and inflation.
Disciplinary actions can be even more damaging than increased premiums. A professional’s identity is often tied to their reputation, and losing a professional license can have serious consequences.
Taking early action—such as addressing issues promptly, communicating with clients, notifying insurers, and seeking conflict resolution—can help mitigate claims and reduce financial, regulatory, and disciplinary risks for insured professionals.
Early Mitigation Strategies
Professionals must navigate complex and evolving laws, regulations, technologies, and standards of care. Staying informed is essential to avoid non-compliance. Attorneys, professional associations, and continuing education can help professionals remain updated.
When clients or patients express concerns, professionals should respond quickly and communicate their corrective actions.
Clear and timely communication can make clients feel heard and may resolve issues before formal complaints arise.
Professionals should also notify their insurance carriers of potential claims, even if no formal demand has been made. Many insurers provide pre-claim assistance; data from AXA XL shows that over 80% of cases where pre-claim assistance is offered are resolved without a formal claim.
Once a formal complaint is filed, early notification to the insurer, prompt issue correction, and proactive settlement strategies can reduce exposure.
The emphasis here is on “early.” Quick notification to the insurer and immediate correction of issues can help mitigate damages. It is crucial to differentiate between correcting an issue and admitting fault, as many insurance policies prohibit admitting liability without the insurer’s permission.
If immediate correction is not possible, mediation, voluntary binding arbitration, and non-binding arbitration can facilitate early resolutions.
Settling claims can have various implications depending on the profession. For example, settling a medical malpractice claim may lead to regulatory and licensure consequences. Insured professionals should be aware that some policies allow insurers to settle claims without the insured’s consent.
Mediation encourages the participation of the insurer and legal counsel, making it a beneficial process for addressing insurance-related issues that may impact settlement, such as coverage scope and future implications of a settlement.
However, mediation often requires multiple sessions before reaching an agreement.
Some states allow voluntary binding arbitration (VBA) for certain claims, where arbitrators evaluate the claim and their decision is binding. While VBA can be effective, it requires agreement from all parties involved.
Non-binding arbitration (NBA) allows either party to reject the award.
Although NBA can be costly and time-consuming, it may provide insights into the strengths and weaknesses of each case, aiding settlement negotiations.
Avoiding Common Pitfalls
While employing early mitigation strategies, professionals should be cautious of two common pitfalls: estoppel and conflicts of interest.
Estoppel can occur when a professional takes a position during the pre-claim or claim phase that later restricts them from changing that position in litigation. Admitting fault during pre-claim discussions can weaken a party’s position later.
Professionals should consult with their insurer and legal counsel to avoid estoppel issues.
Conflicts of interest can arise when a client claims against a professional while the professional continues to provide services to correct the alleged error. This situation can violate professional conduct codes and lead to disciplinary actions.
Recognizing potential conflicts and engaging competent counsel early is essential for navigating these complex issues.
Insured professionals can avoid regulatory and disciplinary consequences by staying informed, acting promptly, and notifying their insurer of potential claims. If a complaint progresses to a claim stage, early settlement tactics can lead to swift resolutions. However, it is vital to avoid pitfalls that could complicate claims or limit defenses.
Robert Barton, an associate at RumbergerKirk in Tampa, focuses on coverage disputes and professional liability claims.
Frank Sheppard, RumbergerKirk’s managing partner, specializes in professional liability, employment, and commercial litigation.
