Physicians' Insurance Limits and Malpractice Payments: Evidence from Texas Closed Claims, 1990-2003

Abstract

Physicians' insuring practices influence their incentives to take care when treating patients, their risk of making out-of-pocket payments in malpractice cases, and the adequacy of compensation available to injured patients. Yet, these practices and their effects have rarely been studied. Using Texas Department of Insurance data on 9,525 paid malpractice claims against physicians that closed 1990-2003, we provide the first systematic evidence on levels of coverage purchased by physicians with paid liability claims and how those levels affect out-of-pocket payments and patient compensation. We find that these physicians carried much less insurance than is conventionally believed, that their real primary limits declined steadily over time, that policy limits often act as effective caps on recovery, and that personal contributions by physicians to close claims were rare. Our findings call into question a number of common assumptions about the relationship between physician insuring practices and the medical malpractice liability system.

For a shorter, summary version of this research, see Charles Silver, Kathryn Zeiler, Bernard Black, David Hyman & William Sage, Malpractice Payouts and Malpractice Insurance: Evidence from Texas Closed Claims, 1990-2003, Geneva Papers on Risk and Insurance yyy-zzz (forthcoming 2008), available at http://ssrn.com/abstract=983199.

Keywords: medical malpractice, insurance, liability

JEL Classification: G22, K13, K41