Florida physician can sue insurer over forced liability settlement

While most states allow doctors to have final say in settlement decisions, it's up to insurers to give them that option, experts say.

By Amy Lynn Sorrel, AMNews staff. June 25, 2007.

When the medical liability carrier for Anthony G. Rogers, MD, waited until the last minute to investigate a claim against him, settled the lawsuit and then used it against him to cancel his coverage, the anesthesiologist turned the tables on the insurer and sued.

A panel of Florida's 4th District Court of Appeals recently handed the physician a preliminary victory, saying Dr. Rogers could pursue his lawsuit against Chicago Insurance Co. for allegedly acting in bad faith.

The insurer is appealing the ruling to the full court. If the decision stands, experts say it could serve as an example to doctors who find themselves in similar situations. It is generally up to insurers to decide to give doctors final say in settlement decisions.

"While the insurer must be given wide discretion in investigating a claim and making settlement decisions, it cannot act on its interests alone," the court's unanimous May opinion states.

A unique Florida law bars medical liability carriers from including a policy provision giving doctors veto power over an insurer's decision to settle, known as the consent-to-settle clause. But the law requires insurers to make that call in good faith and in the insured physician's best interest.

"This obligation is solely for the benefit of the insured. If the insured cannot enforce this obligation, then it has no effect at all," Judge Martha C. Warner wrote.

In general, legal experts say it's difficult to bring or prove a bad faith claim against an insurer in Florida and elsewhere, making these types of lawsuits rare. Nevertheless, the conversation over whether to defend or settle a claim can be frustrating for doctors.