When Your Malpractice Insurer Investigates You: What to Know

When psychiatrist Paul Sartain, MD (not his real name), received a letter from his state’s medical board, he was concerned. A patient’s family complained that he made sexual advances to a young woman he treated for psychotic depression.

“There was absolutely no evidence, and the claims were vague,” he said. “I think the family was angry at me and with the system — the woman had not gotten better.” Sartain reviewed his medical records and then called his malpractice insurer.

The insurer asked about his involvement with the patient’s case, if there was anything credible to the patient’s complaint, and if he had thorough documentation. Then, the carrier offered Sartain his choice of several attorneys who could represent him. The medical board ultimately closed the case with no findings against him, and the patient’s family never sued him.

While Sartain said he trusted his carrier-provided attorney, he would have considered hiring his own attorney as well if a criminal issue was also alleged.

“If I’m wrongly accused, I’m defended (by the carrier). If I had stolen money or had a sexual relationship with the patient, then you’re acting outside the bounds of what is protected (by the carrier),” he said.

How Medical Board and Malpractice Insurer Investigations Differ

Medical board complaints differ from malpractice claims, in which patients seek damages. The investigation process varies, too.

When a patient reports a doctor to a state medical board, they may also sue the doctor for monetary damages in civil court. The medical board responds to patient complaints made directly to them, but it also may also initiate its own investigations. Those can be prompted by a malpractice claim resolution, with a court verdict against the doctor, or a settlement recorded in the National Practitioner Data Bank.

Malpractice insurers may offer limited legal representation for medical board investigations, requiring the doctor to report the medical board issue to them before the doctor takes any action. Often, they will cover up to $50,000 in defense costs but not cover any subsequent medical board fines or required classes or medical board fees.

When a doctor contacts the carrier about a medical board investigation, the carrier may ask for the medical board document and the medical records, said Alex Keoskey, a partner in Frier Levitt’s life sciences group.

The carrier may want to ask about the patient, staff members involved, the doctor’s background, if there have been previous medical board investigations or lawsuits against this doctor, and the doctor’s opinion of the allegations. The doctor should be transparent with the carrier, Keoskey said.

Some carriers conduct more in-depth investigations, examining record-keeping, prescription practices, patient consent processes, and continuing medical education status. That’s because the medical board may inquire about these as well should its own investigation expand.

Not all carriers explore cases like these, even if reimbursing for defense costs, said Karen Frisella, director of professional liability claims at BETA Healthcare Group in California. In her experience, a licensing investigation usually follows a claim resolution that was already worked up by the carrier. If a complaint was made directly to the licensing board without an accompanying liability claim, the carrier’s ability to initiate an investigation on the incident depends on the policy terms or coverage available.

“Typically, a professional liability policy requires that the insured report a claim to trigger coverage. The carrier can’t unilaterally decide to open a claim,” she said. A licensing board investigation is not a claim by definition and therefore does not provide a mechanism for the carrier to open a liability claim file, she added.

If the medical board ultimately restricts the doctor’s license or puts the doctor on probation, that becomes public, and the underwriting department may then look into it.

Malpractice insurers routinely monitor licensing board discipline notices. A reprimand or restrictions on a doctor’s license could trigger a review of the physician’s future insurability and lead to higher premiums or even nonrenewal, Frisella said.

If a carrier investigates a reported claim and determines there are issues with the care rendered, whether there is an accompanying medical board action, that also can affect underwriting decisions, Frisella said.

Who Is Your Attorney Really Working for?

The doctor should understand whose interests the attorney represents. In a medical board claim, the attorney — even if defense is paid by the carrier — represents the doctor.

Frisella said her organization provides pass-through coverage, meaning it reimburses the doctor for medical board defense costs. “Because the carrier isn’t directing the medical board defense, it is not generally privy to the work product.”

If a patient files a malpractice claim, however, the attorney ultimately represents the insurance company.

“The panel counsel who works for the insurer does not work for the doctor, and that’s always important to remember,” Keoskey said. While the attorney will do their best to aggressively defend the doctor, “he’s going to protect the insurer’s interest before the doctor’s.”

Physicians who find any conflict of interest with their insurer should seek counsel.

Such conflicts could include:

* Disagreements over the case’s ultimate worth. For example, a physician might want a case to settle for less than their carrier is willing to pay.

* The legal judgment may exceed the carrier’s policy limits, or there are punitive damages or allegations of criminal acts that the insurer does not cover.

In these cases, the insurance company should recommend the doctor get personal counsel. They will send a reservation of rights letter saying they will defend the doctor for now, but if the facts show the doctor committed some type of misconduct, they may decline coverage, said Keoskey. Some states, including California, require that the carrier pay for this independent counsel.

Unless there is a conflict of interest, though, having a personal attorney just makes the situation more complicated, said Frisella.

Deborah Abrams Kaplan is a journalist based in New Jersey.