Liability for Lack of Malpractice Insurance?

Friends of PL Matters know that maintaining malpractice insurance is a must, regardless of your profession.  Clients count on professionals to get things done right.  When things don’t go exactly as planned, clients get unhappy, lawsuits are filed, and malpractice insurance kicks in to protect the professional.  But what if the professional lacks insurance? May the client maintain a cause of action for lack of insurance?

In Jarrell v. Kaul, plaintiff underwent a lumbar fusion surgery.  Following the surgery, plaintiff’s back pain worsened and he experienced other complications allegedly due to improperly placed screws during the lumbar fusion. As it turns out, the surgeon maintained a malpractice policy that specifically excluded claims for spinal surgery. In the lawsuit that followed, the plaintiff alleged negligence, misrepresentation, and lack of informed consent based on the surgeon’s failure to maintain insurance.  The plaintiff claimed that the lack of coverage violated New Jersey law. The plaintiff also sued the hospital.

On appeal, the New Jersey Supreme Court concluded that there can be no direct action against the surgeon even though he may have arguably failed to comply with New Jersey’s statutory requirement to maintain insurance. Additionally, “although a reasonably prudent patient may consider a physician’s compliance with the statutorily imposed liability insurance requirement material information, lack of compliance or failure to disclose compliance does not necessarily provide the predicate for an informed consent claim.”

The court was not so lenient on the hospital, holding that a health care facility that grants privileges to a physician has a duty to ensure the physician maintains the proper medical malpractice liability insurance.

The implications from Jarrell are two-sided for medical professionals.  As to individuals, the decision restricted malpractice claims against uninsured doctors.  However, the decision may expose health care facilities to additional liability for granting privileges to an uninsured physician or failing to investigate whether its physicians are maintaining their insurance.  Thus, medical practices that grant privileges to outside physicians need to develop and maintain protocols to ensure that all physicians operating under its roof are insured.  To take it one step further, both health care facilities and physicians should make sure the applicable policy covers the physician for the services she is performing.


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