Large med mal verdicts drive hospital liability up: Report

By Claire Wilkinson National, Pennsylvania Source

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  • October 31, 2019

SOURCE: BUSINESS INSURANCE

Self-insured hospital professional liability claims remain stable overall, but the frequency and severity of large excess claims continues to increase amid a rising number of large medical malpractice verdicts, according to a new report.

The number of hospital professional liability claims experienced by health care organizations at the $2 million occurrence level is expected to remain flat, while claim severity, including defense costs, is growing at a 2% annual rate, according to a report released Tuesday by Aon PLC and the American Society for Health Care Risk Management.

However, the frequency and average severity of losses greater than $5 million continue to increase, the report said.

“After an increasing number of large medical malpractice verdicts following years of premium decreases, all stakeholders in malpractice liability are under pressure,” the report said.

As a result, premium rates and self-insured retentions are increasing, and medical malpractice insurers are reducing capacity or even exiting the market, the report found.

The average indemnity paid for claims over $5 million is $10 million now, compared with $8.6 million a few years ago, the Aon database reveals.

Beazley PLC’s database of medical malpractice claims also shows the average cost of a paid claim increased by 6% in 2018, versus 2017. In the past decade, average professional liability claim values have increased by 50%, to almost $600,000 in 2018, from $400,000 per claim in 2009.

The increase in average cost of claims with indemnity is driven by a higher portion of large claims in recent years, the report said. The proportion of claims greater than $5 million settled in the 2015 to 2018 time period increased to 1.9%, the steepest increase since 2000.

The report pointed to greater incidence of high-value jury verdicts, some in excess of $150 million, and noted that plaintiffs attorneys are now trying cases in new venues.

For example, Pennsylvania is proposing to eliminate a venue rule, which if it goes into effect would allow venue shopping instead of limiting medical malpractice cases to the county where the claimant’s injuries occurred, the report said.

Issues related to labor and delivery, with an average total cost of over $450,000, continue to be significantly more severe than claims related to other allegations, the report said.

Claim severity for obstetrics claims is “extremely high” and approximately 50% higher than the overall average hospital professional liability severity, the report said.

The database used in the analysis includes 127 health care systems in the United States, representing 33% of the total U.S. hospital industry, the report said.