Problems arises when physicians take matters into their own hands and try to self-handle a liability claim.

Example: The patient seemed like a reasonable person, and you thought you could handle the matter without bothering the insurance company. In fact, the claimant was a little old lady who assured you that, “I only want what’s coming to me.” Based on this, you mailed the claimant a $5,000 check, along with a release form, asking her to return the signed release.  Sadly, though, that sweet lady cashes the check but “forgets” to sign or return the Release. Oh well, never mind — you will probably never hear from that lady again and you consider the matter closed . . . or so you thought (hoped?).

Fast-forward eleven months later, though. That sweet and understanding little old lady becomes a plaintiff. Her attorney sues you for the remainder of her damages. Her nephew knew a man whose brother had an injury just like hers, and he supposedly collected $2 million in court. The little old lady decided that these odds beat buying a lottery ticket and consulted an attorney. Since you advanced her the $5,000, she feels this must be an admission of liability. What about her other damages, like pain and suffering or future medical bills?

Once you hear from the lawyer, memories of the exchange with the patient start coming back to you. Wasn’t that matter settled? Not exactly, it was half-settled. You did your half: paid some money. The patient overlooked the little detail of signing a release. You’re out the $5,000 without having extinguished the legal right of action against you.

In truth, there is no such thing as a half-settlement, any more than there is such a thing as being “half pregnant.” Settlement is an all-or-nothing proposition.

Since you’ve heard from an attorney, though, it occurs to you that it’s now time to report this loss to the insurance company. More troubling, though, the insurer says it may not cover the loss because your earlier unauthorized offer to settle hampered its ability to defend the claim. Cold-Hearted Mutual Insurance Company is off-put and quotes the following language, standard wording in most liability insurance contracts:

“No insured shall, without our consent, make any offer or payment, except for first aid . . .”

Now your kindness toward the patient seems to be backfiring. Would you want an insurer telling you how to practice medicine? Probably not.

Then what makes you think you or any physician are qualified to handle or adjust claims? Advice: let the insurer do what you pay it to do — and what your premium pays them to do — i.e., investigate and handle claims. Medical professionals may be no more better suited to handling a liability claim than an insurance adjuster is qualified to perform a heart bypass procedure.

If an insurer botches a case, you can hold it accountable. If you mis-handle a claim, you or your practice may face painful financial consequences. If you want to “fast-track” a settlement for patient relations or goodwill purposes, fine. Run that by the insurer, first, though. It may agree with your proposed course of action. If not, you may still decide that the patient relation benefits outweigh the coverage risks.

While claims-handling isn’t rocket science, it is often trickier than outsiders – including physicians — recognize. If you are insured, let the insurer adjust losses, a function for which it has trained professionals. If you want to handle claims yourself, get written approval from your insurer to do that. At minimum, call your insurance representative and get a “consult” with him or her and ask for some guidance here. Follow up the conversation with a confirming letter.
Otherwise, do-it-yourself claims-handling is usually as successful (and as wise) as do-it-yourself heart surgery, dentistry or lawyering.

The above was excerpted from Quinley, KM Bulletproofing Your Medical Practice: Risk Management Techniques for Physicians that Work (SEAK 2000).  Please click here to download a free complete copy of Bulletproofing Your Medical Practice: Risk Management Techniques for Physicians that Work.