Absolutely. That’s the downside with insurance. Liability insurance
is the major impetus behind many costly and frivolous lawsuits. When you
are well-insured, you have deep pockets. This can only attract lawsuits.
Whether you are rich or poor, a prospective litigant knows that your insurance
company has tons of money. Plaintiffs’ lawyers know that insurers
will settle even a frivolous lawsuit rather than fight, because it is
less costly. It is insurance that has greatly contributed to our transformation
into a nation of litigants.
Because insurance attracts lawsuits, and because of fast-rising insurance
costs, more and more professionals and businesspeople now ‘go bare’
without insurance. Going bare is particularly common with physicians who
have been hardest hit by malpractice suits and exorbitant malpractice
premiums. High-risk specialists, obstetricians, orthopedic surgeons, and
others pay $100,000 or more annually for their malpractice coverage. Physicians
in the litigious states of California, New York, and Florida pay two or
three times that for the same coverage. A general practitioner in a low
litigation state still pays $20,000 or more annually for insurance. And
this won’t buy much coverage.
Insurance costs dig deeply into every medical professional’s earnings
already hammered by reimbursement cutbacks and managed care programs.
Nor are unaffordable premiums only a doctor’s problem. The litigation
explosion has impacted every profession and business. Going bare is gaining
traction in even such lower risk occupations as law, financial services,
Premium costs are only one reason so many professional and business owners
are abandoning insurance. Doctors, other high-risk professionals, and
business owners understand that they greatly increase their chances of
getting sued only because they are insured. Without liability insurance
they wouldn’t be deep pocket defendants, particularly if their assets
We have scores of doctor clients who now practice without liability insurance.
However, you can’t always avoid insurance. Physicians, by state
regulation, often must carry malpractice insurance. HMOs and hospitals
frequently require their affiliated doctors to carry liability insurance.
Most other professionals consider insurance an option. However, going
bare can only make sense if you have few assets or if your assets are
Going bare discourages lawsuits. We can illustrate this with the case of
a cosmetic surgeon who was threatened with five malpractice suits in three
years (not one case had apparent merit). In each case we pointed out to
the patient’s attorney that our doctor client had no insurance and
that his assets were protected. Not one patient sued. If this doctor had
insurance, he would undoubtedly have been sued several times.
One dilemma of going bare is that you must pay your own defense costs or
face a default judgment if you don’t defend the case. This quandary
is particularly undesirable when you know that you have done nothing wrong.
Nor do defense costs come cheap. It can cost $100,000 or more to defend
against even a routine liability or malpractice suit.
One compromise solution is to retain a law firm to defend you if you are
sued. Your annual retainer would cover the litigation costs. A number
of professional and business clients retain us to keep them completely
judgment-proof (we continuously monitor their finances to make certain
they stay fully protected). These professionals have their defense costs
covered through a malpractice defense firm whose fee is paid through a
separate defense-only policy. These professionals practice with confidence
that they won’t lose their assets even if they are sued and lose.
Of course, the uninsured professional or business owner should let their
clients know that they have no coverage so their client or patient will
have dampened enthusiasm to sue.
More legal defense fund insurers are popping up. They insure only the defense
costs. But when you couple good legal defense coverage with a good asset
protection plan, you may have a smart alternative to huge insurance premiums
and an insurance policy that will only magnetize lawsuits.
Still, self-insurance isn’t for everybody. Your insurance premiums
may be a bargain, considering your risks. Or you may prefer insurance
− if only for your own peace of mind. Some people aren’t comfortable
unless they are insured against every possible lawsuit, no matter how
remote the odds. You must assess your own comfort level to decide your