The majority of Malpractice policies include a provision as follows:
We may solicit settlement offers on any claim. No offer to settle a claim will be accepted unless we have your consent. However, if you withhold consent to a settlement offer that we deem to be reasonable and that is acceptable to the claimant, we may request that the matter be submitted to a mutually acceptable local arbitrator. The arbitrator will decide whether consent has been unreasonably withheld and will be binding. If the arbitrator rules in our favor, the ruling will be deemed to be your consent where permitted by law. Each party will pay its own incurred expenses, except we will bear pay the expense of the arbitrator.
The clause essentially allows you to participate in the settlement of a claim as it obliges the insurers to seek your consent before paying a claim.
Many insurance professionals see this as a advantage because it permits your input into the claims settlement process. However, this is can be an illusion because of the following factors:
- Regardless of the consent provision, most medical professionals are not experienced in the handling of malpractice claims and are comfortable leaving the direct negotiation to the insurer’s lawyers.
- The cost of seeking an arbitrator’s determination in the event of a dispute may be expensive and not worth the time;
- If the claim is not expeditiously settled, it may expose the insurer to Bad Faith lawsuit or cause an increase in the cost of defending the claim, which will ultimately impact your claims record.
- Most insurance companies have an incentive to settle claims quickly and cheaply, which in the long-run protects your claims record.
Conversely, if a Policyholder agrees to waive this Consent to settle provision and receive a commensurate premium discount an endorsement will be attached to the policy which modifies the wording as follows:
We may settle any claim at our discretion and without your consent.
This allows the insurer full control of the claims handling and negotiation process. Unless you have a strong desire to become directly involved in the claims negotiations process, the premium discount is your best option. As a general rule the majority of well-managed malpractice insurers will cooperate with their policyholders to ensure a claim is handled efficiently and in a fair manner. This would include input into the settlement negotiations and it is rare an insurer will ignore a policyholder’s opinions.
However, if you lack confidence in your malpractice insurer and suspect that a claim made be settled without your input and ultimately damage your professional reputation, then you should retain the Consent to settle provision.
The Consent to settle provision can be tricky and varies in different Malpractice policies. You should discuss how it is applied and claims handling in general with your insurer and insurance agent.