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You have just been served with a Malpractice Lawsuit.  Your emotions will range from anger and rage to self-denial and guilt.  Take a little time to breath.  Once you have done that your 1st step should be to report the claim to your malpractice insurance agent and/or your malpractice insurance claims department.  This should be done as soon as possible as the worst thing in the world you can do is not report the claim.

Now that you have reported the claim and the malpractice claims department contacts you they likely will obtain local counsel for you to defend you in the claim.  Local counsel gathers the facts needed and reports back to you and the claims department their evaluation of the claim.  Now comes the hard part.  Most Professional Liability Insurance Policies give you the professional the final determination on whether to settle.  Do you fight the law suit or settle.

There are a number of things to consider even if you have done nothing wrong: 

1.       If you have 1st dollar defense and you settle you will owe your deductible. 

2.       If your policy has a “hammer clause” and the malpractice insurance carrier can settle for a certain amount and you lose, you will be on the hook for any judgement over and above the amount the carrier could have settled.

3.       How will this impact your insurability and insurance rates in the future?  Malpractice carriers look at the total cost of the claim.  So even if you win and there is no indemnity payment a large defense bill could also jeopardize your insurance rates and coverage.

4.       Your policy limits.  Even if you have a separate limit for defense costs, an expensive litigation can exhaust your policy limits.  Once the malpractice carrier has exhausted the policy limits, you are likely on your own.

5.       Your professional reputation.  How will settling the claim impact your reputation?

6.       The amount of personal time that the defense of your claim will take and the disruption to your practice.

7.       What are the chances that you will win the suit?  Listen to your attorney but the final decision is yours.  In some cases your defense attorney will knows that the other side is just looking for a quick settlement to make the claim go away.

An Article that was recently published in CPAFM website can also help with this decision.   To read this article click the following links:

Road Map of a Malpractice Lawsuit

L Squared Insurance Agency stands ready to help Attorneys, Accountants, Dentists and Title Companies with the Malpractice Insurance needs.  Once you have been served with a lawsuit, you will want to know that you have the proper protection to cover your assets.

Posted 10:18 AM  View Comments

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