Medical Malpractice Insurance
A surgeon was driving in the parking lot at one of the world’s most prestigious teaching hospitals. He had just spent a long day in the O/R working on an especially difficult case, and was running late for his daughter’s spelling bee. As he rushed through the parking lot on his way to the school, he accidentally struck a nurse who was walking to her vehicle. He got out of the car to make sure she was all right. She had a few minor scrapes on her legs, and said she was okay other than that. He walked her to her car, and even called her the next day just to make sure she was still okay. He was told that she was just fine and that there were no problems. Two weeks later he received notice of a civil lawsuit. Apparently she had checked herself in to the emergency room three days after the accident occurred. He learned through a friend of a friend that she had been urged by her colleagues to “go after the easy money.”
Asset Protection Defined
While estate planning focuses on preventing many different wealth-eroding factors (taxes, prodigal spenders, poor trust structure, divorce, and others), for this article’s purpose, asset protection is specific to wealth erosion caused by a liability claim or bankruptcy.
With the advent of Internet research, asset protection has become a major concern for physicians. Today it is possible that for less than $1,000, others can easily uncover the following information about you: (68)
- Your annual income and the income of your spouse
- Your assets
- Your social security number
- The balance in your accounts
- The location of your accounts, including account numbers and safe deposit boxes
- The investment positions you own, and the trades you have placed in your accounts
- The equity in your home
- Your mother’s maiden name
Based on the above information, a plaintiff’s attorney can quickly tell if you are a good candidate to be a defendant in his lawsuit. If you have deep pockets, great income, and a lot of assets, it is far more likely you will find yourself on the wrong end of a lawsuit. On the other hand, if a little research uncovers that you only own a home with little equity and few other assets in your name, you are much more likely to avoid the unpleasantness and expense of a lawsuit. We are frequently asked about asset protection in specific relationship to medical malpractice insurance issues. As a result, we have compiled the following data to show the trends and breakdown of near-term malpractice claims history by state. (61)
Unfortunately, some physicians erroneously consider the need for asset protection only in the context of medical malpractice. Although malpractice claims are a legitimate concern in several high-risk states, our experience is that malpractice should not be the sole focus or main concern. Anecdotally, we have witnessed several physicians sued for frivolous malpractice issues, but we have yet to personally see one lose a dime of their own money to a malpractice claim. However, we have seen several examples where physicians had their personal assets successfully attacked as a result of a claim outside of their medical practice.
We became even more passionate about this issue after a good friend of one of our advisors lost his multimillion-dollar nest egg due to a frivolous injury lawsuit caused by someone else. He was the only one with deep pockets in the vicinity of the event, so the attorneys went after him–and won. This entire family was hit hard emotionally, and his net worth was decimated from $8 million to $350,000. This cemented our opinion that this is an important area of comprehensive wealth management that doctors and dentists simply cannot afford to ignore. (62)
When it comes to asset protection, timing is everything. In fact there are only two time frames: before and after a hint of trouble. Carefully constructed asset protection strategies that are fully implemented before any hint of trouble are much more likely to succeed, and can save you hundreds of thousands, or even millions, of dollars. By “hint of trouble,” we mean before an event occurs that could trigger a lawsuit, or long before it appears that your creditors may push you into bankruptcy. Unfortunately, the same is not true for asset protection strategies initiated after a hint of trouble. Moving assets to avoid existing plaintiffs or creditors could cause major problems, and leave you subject to a claim of fraudulent conveyance. This could cause you to automatically lose your suit; in the worst-case scenario, you could go to jail. This is the key message: the sooner you get started, the more likely you will be able to protect you and your family from losing your assets to litigation.
Avoid situations that put you at risk. In other words, avoid lawsuits in the first place. This could mean avoiding dangerous situations and minimizing risk.
Make it so difficult for plaintiffs to sue you and recover that they don’t bother to go after you in the first place, even if an event does occur. The result: Your assets and your business are protected and prevented from claims if you are sued. In other words, with a carefully drafted plan, your plaintiffs will not have an economic incentive to sue you.
It is estimated that over 19 million lawsuits will be filed in the U.S. this year. (68) The focus of asset-protection planning is to establish appropriate measures ahead of time so that when a lawsuit comes your way, you are already prepared to defend yourself. Many different strategies exist to attempt to protect assets, but the finest are those that do so aboveboard, without trying to hide anything.
We are amazed by some of the verdicts that have been handed out by juries and judges in our own communities, and even more amazed by some of the judgments handed out around the country. Randy Cassingham gives out The True Stella Awards® (64) each year for the most wild, outrageous, or ridiculous lawsuits. He states in his book, The True Stella Awards, (69) “Other times, people view doctors and hospitals more as deep pockets full of money than as partners in responsible health care.”
Ridiculous cases demonstrate that asset protection is important for any physician with substantial assets or income. Asset protection attorney Robert Mintz warns, “Every day in court a sympathetic plaintiff prevails against a wealthy or comparatively wealthy defendant–even in those cases which appear to be absurd, illogical, and utterly without merit.” (68)
You have worked way too hard to see your efforts go up in smoke because they were not properly protected. The biggest problem with asset protection: It is an ever-evolving discipline. Once a strategy is used frequently, an attorney somewhere finds a way to beat it. What works, and does not work, is also different on a state-by-state basis, as every state has different laws to circumvent. To ensure your assets are as safe as possible, it is important to work with an expert attorney who specializes in asset protection to make sure that your plan is up to date with the most recent case law.
(61) 2007 Medical Malpractice Crisis States, as determined by the American Medical Association, cross-referenced with information from the 2007 Kaiser Family Foundation analysis of data from the National Practitioner Data Bank (NPDB). States are listed in order of highest average claims first. For further information on the current state of medical reforms: http://www.ama-assn.org/resources/doc/arc/mlr-now.pdf (62) Particulars are altered to protect the friend’s privacy but the story is still very much on point with what happened. (64) Stella Awards® is a registered trademark of This is True, Inc. (68) Mintz, Esq., Robert J. Asset Protection for Physicians and High-Risk Business Owners. Fallbrook, CA: Francis O’Brien & Sons Publishing Company, Inc., 2007. (69) Cassingham, Randy. The True Stella Awards: Honoring Real Cases of Greedy Opportunists, Frivolous Lawsuits, and the Law Run Amok. New York, NY: Penguin Group, 2006.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal services. Please consult the appropriate professional regarding your legal needs.