How Liability Insurers Protect Patients and Improve Safety

32 Pages Posted: 27 Jul 2018 Last revised: 10 May 2019

See all articles by Tom Baker

Tom Baker

University of Pennsylvania Carey Law School

Charles Silver

University of Texas at Austin - School of Law

Date Written: 2019


Forty years after the publication of the first systematic study of adverse medical events, there is greater access to information about adverse medical events and increasingly widespread acceptance of the view that patient safety requires more than vigilance by well-intentioned medical professionals. In this essay, we describe some of the ways that medical liability insurance organizations contributed to this transformation, and we catalog the roles that those organizations play in promoting patient safety today. Whether liability insurance in fact discourages providers from improving safety or encourages them to protect patients from avoidable harms is an empirical question that a survey like this one cannot resolve. But, as we show, insurers make serious efforts to reduce their losses by encouraging and helping health care providers to do better in at least six ways. (1) Insurers identify subpar providers in ways that provide the opportunity for other institutions to act. (2) Insurers provide incentives for providers by charging premiums that are based on risk and by refusing to insure providers who are too high risk. (3) Insurers accumulate data for root cause analysis. (4) Insurers conduct loss prevention inspections of medical facilities. (5) Insurers educate providers about legal oversight and steps that they can take to manage their risks. (6) Finally, insurers provide financial and human capital support to patient safety organizations.

Keywords: Law and economics, torts, health care, healthcare providers, doctors, hospitals, medical malpractice, liability insurance, risk management, insurance as governance, incentives, moral hazard, patient safety organizations, PSOs

JEL Classification: G22, I19, L89

Suggested Citation

Baker, Tom and Silver, Charles M., How Liability Insurers Protect Patients and Improve Safety (2019). DePaul Law Review, Vol. 68, Pg. 209, 2019, U of Penn, Inst for Law & Econ Research Paper No. 18-20, U of Texas Law, Law and Econ Research Paper No. 582, Available at SSRN:

Tom Baker (Contact Author)

University of Pennsylvania Carey Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-746-2185 (Phone)


Charles M. Silver

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
512-232-1337 (Phone)
512-232-1372 (Fax)

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