Medical schools teach aspiring doctors about microbiology, surgical procedures, medical ethics, and patient communication, but rarely about medical malpractice. It is a notable lack, considering the very real threat of facing a lawsuit at some point in your medical career.
When you start thinking about dealing with a malpractice claim, you may have questions like, “How can you protect yourself from malpractice?” and “What assets can you lose in a medical malpractice lawsuit?”
In this post, we provide more information on which assets are at risk and how asset protection tools for doctors can help.
What asset types can you lose in a malpractice claim?
Depending on case specifics and state laws, a successful medical malpractice plaintiff may be able to access nearly anything of value, including the following:
Financial Assets
- Bank accounts – Savings accounts, checking accounts, investment accounts, etc.
- Investments – Stocks, bonds, CDs, and other investments
- Real estate – Your vacation home, parcels of land, or rental real estate
- Digital Assets – Cryptocurrency, NFTs, and other digital investments
Personal Assets
- Personal property – Jewelry, precious metal coins and bars, machinery, and equipment
- Vehicles – Cars, trucks, boats, motorcycles, and RVs
- Possessions – Artwork, collectibles, and other valuable personal possessions
How could a medical malpractice lawsuit affect professional assets?
In addition to personal assets, a medical malpractice claim could affect business assets such as the following:
Business Ownership
The financial ramifications of a malpractice lawsuit can be enormous. Between legal defense fees, forced asset liquidation, time away from work to deal with the suit, and increased malpractice insurance premiums, a claim may impact your ability to sustain your medical practice.
Furthermore, if you own a medical practice, you could be included in a lawsuit against your partners, colleagues, or employees.
Professional Licenses
Medical malpractice claims do not typically cause you to lose your medical license. Courts handle malpractice lawsuits but not professional licenses. However, if your state medical board conducts an investigation, it may discipline you by suspending or revoking your license.
Future Earning Potential
While not an automatic outcome of a malpractice claim, doctors may miss out on future income if they lose clinical privileges at some facilities, their patients seek treatment elsewhere, or their insurance premiums go up.
What role does insurance coverage play in protecting assets?
One of the key ways to protect your property from lawsuits is to invest in the right insurance policies. Many physicians find the following insurance policies invaluable:
Malpractice Insurance
A type of professional liability insurance, medical malpractice insurance protects healthcare providers from lawsuits arising from the death of or injury to a patient. While there is no federal requirement to carry malpractice insurance, many states (and medical facilities) require doctors to be insured.
Personal Liability Insurance
Personal liability insurance policies can also help protect your assets against third-party claims. For example, if someone is hurt on your property, you have a bad car accident, your dog bites a neighbor, or you leave a negative review for a local business, you may face a lawsuit.
Car and homeowners’ insurance with high liability limits can defray the legal costs involved in defending yourself and help protect your assets from seizure in case of a settlement or court award.
Umbrella Policies
Umbrella insurance provides coverage beyond the limit of your primary insurance policy. It helps protect your assets from expensive lawsuits that exhaust your main insurance coverage. An umbrella policy is typically much cheaper than your malpractice insurance policy.
What strategies exist to mitigate asset loss in a medical malpractice lawsuit?
No one wants to face a medical malpractice lawsuit. However, planning for one helps protect your assets if a claim doesn’t go your way.
Asset Protection Planning
Asset protection planning is critical to protect your real estate, bank accounts, investments, and other assets from a malpractice lawsuit. A comprehensive asset protection plan can help shield your property from creditor claims and reduce your liability for business debts. Some examples of effective asset protection plans include moving your important assets into an offshore trust such as a Cook Islands Trust. Due to the Cook Island’s legal system heavily favoring defendants, it’s nigh impossible for any U.S. court to reach the assets contained in a Cook Islands Trust.
Legal Counsel and Representation
An asset protection attorney can help you every step of the way, including creating asset protection trusts, using limited liability companies (LLCs), employing equity stripping strategies, and more. Finding someone with experience in this field is essential, as any mistake can expose assets you thought were protected.
Insurance Review and Enhancement
You likely already have medical malpractice insurance, but that doesn’t mean you are completely protected. A comprehensive review of your policy’s coverage limits, deductibles, and exclusions can identify gaps in coverage and other weaknesses. After a professional review, you may decide to increase your limits or purchase additional policies.
Who can be held liable in a medical malpractice lawsuit?
In addition to wondering, w“What assets you can you lose in a medical malpractice lawsuit,?” many people ask, “Who can be held liable in a malpractice lawsuit?” Malpractice lawsuits can name a variety of defendants, including the following:
Healthcare Professionals
Courts can hold any medical professional liable if they provide substandard care that harms a patient. This includes doctors, nurses, dentists, technicians, and pharmacists. However, doctors are often named in lawsuits because they are highly visible.
Hospitals and Medical Institutions
Medical facilities can also be found liable for patient injuries and death. For example, a hospital may have negligent employment practices, or a clinic may lack appropriate systems to protect patients.
Furthermore, when a doctor is an employee (rather than an independent contractor), the medical facility may be liable for his or her negligent acts under the legal doctrine of respondeat superior.
What factors influence the exposure of assets in a medical malpractice lawsuit?
Several factors influence the amount of compensation awarded in malpractice claims and the risk individual providers face.
Severity of Malpractice
The extent and nature of the patient’s injury can heavily affect the settlement or court award. Severe, long-term (or permanent) injuries with a high medical cost and/or life impact tend to trigger higher amounts. Similarly, strong evidence showing the doctor was negligent or breached the standard of care can also affect the case.
Jurisdictional Laws
Different jurisdictions place different limits (known as “caps”) on the compensation awarded in medical malpractice cases. Idaho and Montana limit non-economic damages to $250,000, while Nebraska caps malpractice claims at $2,250,000.
Over half of U.S. states — including California, Colorado, and Massachusetts — cap malpractice claims. Arizona, Pennsylvania, Vermont, and Florida are examples of states without a limit.
Insurance Coverage Limits
Even where insurance coverage is mandatory, the minimum required amount may not provide adequate asset protection. The traditional $1 million/$ 3 million malpractice policy would be insufficient in the face of a multi-million-dollar jury verdict. Your assets could be at risk if the claim exceeds your policy limit.
Are there any exemptions to protect certain assets from being lost?
Thanks to state and federal legal limitations, lawsuit creditors cannot typically seize all of your assets. For example, you may be able to retain a personal vehicle, a certain bank account balance, and any Social Security survivor’s benefits. The following exemptions may also protect specific asset classes:
Homestead Exemption
Homestead exemptions can prevent you from losing your primary residence to creditors. However, homestead laws vary widely by state. Some states (like Texas and Florida) have unlimited homestead protection, some have limited exemptions, and some (like New Jersey and Pennsylvania) don’t offer any.
Also, this exemption only protects you from being forced to sell your home to pay your debts. It does not protect you from foreclosure if you can’t afford the mortgage payments.
Retirement Accounts
The law typically protects retirement assets like 401(k)s and pension plans governed by the Employee Retirement Income Security Act (ERISA). In addition, most IRAs are protected from lawsuits as long as your funds don’t exceed a “reasonably necessary amount.” If you own a business, you may exceed this amount.
Annuities
Many life insurance policies are protected from lawsuit creditors. These include annuities which are a kind of life insurance that provides regular income payments in retirement. However, state law determines whether the cash value and the payout value upon death are fully or partly protected.
Spousal and Child Support
If you owe back child support or alimony, your IRA or 401(k) may be seized to satisfy the debt. The same is true if you owe back taxes. If you can afford to pay off these debts, doing so can help protect your retirement funds.
Which medical professions are at higher risk of malpractice lawsuits?
A 2023 American Medical Association (AMA) study showed that one in three physicians faced a lawsuit in their career. Liability risk varies by age, gender, and practice area.
As a group, the following professions report the largest percentage of lawsuits in their careers:
- Surgeons — 48.9% (with obstetricians/gynecologists, general surgeons, other surgeons, and orthopedic surgeons at highest risk)
- Emergency medicine physicians — 46.8%
- Radiologists — 40.2%
Consulting an Experienced Asset Protection Attorney
Now that we’ve answered the question, “What assets can you lose in a medical malpractice lawsuit?” you may be interested in learning more about asset protection. For more information or legal advice on protecting your property from malpractice claims, contact Blake Harris Law today.
