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Insurer Faces Punitive Damages for Bad Faith in Medical Malpractice Claims

When medical negligence occurs or physicians make mistakes, doctors have medical malpractice insurance to pay for losses to victims. These insurers should negotiate in good faith when their policyholders cause harm. Unfortunately, too often insurers refuse to provide a reasonable settlement offer to people who have suffered serious losses. Insurers may deny responsibility for claims that are obviously covered, or may make low offers which do not provide full compensation for patients and their families.  pediatrics-1529152

When insurers do not make fair settlement offers to malpractice victims, a court case can result, as those who have been harmed by medical negligence file a civil lawsuit to obtain compensation. In some cases, additional claims may also be brought against insurers for their bad faith in dealing with victims. Just recently, one insurer was found to have engaged in bad faith. As a result of the insurance companies failures, it was ordered to pay $14.3 million including punitive damages.

Bad Faith Leads to Large Verdict Against Malpractice Insurer

The bad faith claim originally arose from a tragic incident in which a baby was born with severe brain damage due to medical negligence. The baby was born in 2004, and her brain injury was caused by deprivation of oxygen. The baby lived for three years and the parents filed a lawsuit against their obstetrician, the doctors in the emergency room, and the hospital where the baby was born.

The hospital and the doctors in the emergency room were able to settle the claim for $1.5 million. Their insurers paid this compensation to the parents of the child. The malpractice insurers for the obstetricians, however, did not settle the case. The malpractice insurance policy covering the obstetricians had policy limits of $3 million for the death of the child, and $2 million for the injuries to the mother. The parents, however, won a $6.17 million judgment against the obstetricians. The insurer paid $3.3 million, and the parents received a total of $4.8 million. They were still owed approximately $1.3 million.

While the parents could have pursued personal claims against the obstetricians to seek the remainder of the funds from the doctor's personal assets, they instead filed a bad faith claim against the insurers. The bad faith claim alleged the insurer had provided misleading information about the amount of insurance available to cover the claim for the baby's wrongful death, and the insurer failed to provide the obstetricians with information about a settlement offer, which would have limited the financial risk to the doctors.

Insurance companies have a duty to their policyholders- in this case, the doctors- to negotiate in good faith with plaintiffs who have a claim. The insurers were found to have violated the duty and the Chicago Tribune reports the insurers were ordered to pay $14.3 million, including $13 million in punitive damages. The insurance company facing this large verdict has been involved in 25 bad faith claims in the past 10 years.

The case demonstrates the poor business practices of insurers, as well as the lengths plaintiffs may need to go to in order to get the money they deserve.

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