Knowledge Center | ProAssurance

High-Low, Nice to Meet You

Written by ProAssurance | December 2024

Curbing the Risks of Litigation in Medical Malpractice Claims
By David Anderson and Chris Frostad, Claims Directors, ProAssurance

If a physician’s greatest fear is causing harm to their patient, being involved in a medical malpractice lawsuit might be the second. Malpractice claims can feel like an assault on a physician’s knowledge, competence, and character. Increasingly, across the nation we are seeing enhanced damage claims from plaintiffs and inflated jury verdicts. Malpractice lawsuits represent a threat not only to the physician’s reputation but also to their livelihood and financial well-being.

Outsized Verdicts

Recent data from the U.S. Chamber of Commerce confirms that “outsized verdicts”—those over $10 million—and “mega outsized verdicts”—those over $50 million—are at an all-time high. Insurance industry data from TransRe—an international reinsurance organization—indicates 2022 and 2023 saw all-time highs in medical professional liability verdicts exceeding $10 million. Aggregated data from the National Practitioner Data Bank confirms that 2023 saw the highest average payment on claims involving physicians at just over $475,000 per claim, and the highest total number of claims paying over $2 million.

In 2022, California Assembly Bill 35 introduced reforms to the Medical Injury Compensation Reform Act (MICRA) of the 1970s. The most impactful changes are those modifying the limits on general damage awards, commonly referred to as pain and suffering, which were capped at $250,000 for over 40 years. Beginning January 1, 2023, the caps were diversified, increasing the cap to $350,000 for general damages in most types of injury claims and $500,000 in claims involving death. The general damage cap will be increased each calendar year by $40,000 in cases involving an injury until this limit reaches $750,000 in 2034, and by $50,000 per year in cases involving death until the limit reaches $1,000,000 in 2034. Currently (2024), the MICRA general damage caps are $390,000 for an injury case and $550,000 for a case involving death. Those caps will again increase in 2025 to $410,000 and $600,000, respectively.

For a physician in a medical malpractice case today, the risks of litigation are much greater with larger damages available under the law and juries willing to award those damages. Considering these factors, physicians facing a malpractice claim may be more willing to simply settle a claim based on its risks, not its merits. To some, the risk of a multi-million-dollar verdict—and the potential financial impact it represents—is more alarming than the risk of reporting a settlement to a licensing agency, having a public record of a settlement, facing increased insurance premiums, or being able to be insured at all.

A plaintiff in a case also faces potential ramifications by bringing litigation against a physician. Should a jury find in favor of the defendant physician, the plaintiff receives nothing, and the substantial costs of litigation incurred by the defense are collectible, often including expert witness fees. Recoverable costs can often be in the tens of thousands, and in some cases, in excess of $100,000. Those costs are borne not by the plaintiff’s attorney, but by the individual plaintiff.

High-Low Agreements

In this increasingly contentious and high-stakes landscape, a strategy known as a “high-low agreement” can be an effective tool that allows plaintiffs, defendants, attorneys, and insurance companies to mitigate the risks of litigation and still allow cases to be decided on their merits via a jury trial.

At its most basic level, a high-low agreement is one where the parties agree on certain conditions that will supersede the ultimate jury verdict. Most notably, the parties agree on a “low” amount that will be paid to the plaintiff, even if there is a defense verdict or a verdict awarding a lesser amount. On the “high” side, the parties agree on a ceiling, which is the most that will be paid in the event of a plaintiff verdict, even if the damages awarded are in excess of the agreed upon “high.” In the event a jury returns with a plaintiff verdict and awards damages totaling an amount between the agreed-upon low and high, that is the amount that will be paid, subject to the terms and provisions in the high-low agreement.

Benefits

Having a guaranteed low payment provides benefits to the plaintiff and their attorney. Even if they lose their case or receive a minimal award from the jury less than the low, they receive payment of the agreed-upon low that can cover items such as the cost of litigation and medical bills. It also shields the plaintiff from any risk that the defendant will pursue the costs of litigation or sue for malicious prosecution. For a defendant/physician, the low agreement is beneficial because it may not trigger a report to the National Practitioner Data Bank or state licensing board. When the low is paid after a jury finds in favor of the defendant physician, it is payment of a contractual agreement entered into by the plaintiff and the insurance carrier, which is not a reportable event.

On the other end, a high agreement benefits the defendant by eliminating the risk of a runaway jury verdict. In many cases, the defendant and their insurance company will try to negotiate a high within the limits of the insurance policy, thereby protecting the defendant from personal or excess exposure. For the plaintiff, a high-low agreement can be beneficial because it leads to a faster payment.

Considerations

When negotiating a high-low agreement, the parties will typically take into consideration all relevant laws that apply to the case. For example, in a medical malpractice case, the parties will usually agree that the provisions of MICRA will be applied before the terms of the high-low are applied. This would include reducing general damages awarded to conform with the applicable MICRA cap. If appropriate, the defendant’s right to annuitize future special damages (i.e., future medical care/wage loss) may also be negotiated. In cases that involve multiple co-defendants or other non-party individuals listed on a verdict form, the parties will agree to apply the jury’s apportionment of fault to each individual first, and then consider how the high-low impacts the defendant who negotiated it.

In all cases, when negotiating a high-low structure, the plaintiff and defendant typically agree they will not pursue an appeal of the verdict. Thus, committing to be bound by the jury’s verdict and the superseding high-low agreement helps bring closure to a case. It avoids a potentially years-long battle in appellate courts and guarantees the plaintiff receives their compensation in a timely manner. Further, each side would bear its own fees and costs, thereby bringing further certainty and assurance. Other provisions of the agreement may include no admission of liability on the part of the defendant physician and confidentiality of the high-low agreement terms.

Nothing will ever make litigation pleasant for the parties involved, but strategies like a high-low agreement can help reduce the costs, risks, stress, and uncertainties of litigation for both sides. It is an effective tool and one of the rare elements of litigation in which both sides can achieve a “win” for their clients.

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Sources

U.S. Chamber of Commerce Institute for Legal Reform, Nuclear Verdicts: An Update on Trends, Causes, and Solutions, May 2024, https://instituteforlegalreform.com/wp-content/uploads/2024/05/ILR-May-2024-Nuclear-Verdicts-Study.pdf

Alicia Gallegos, “Mega Malpractice Verdicts Against Physicians on the Rise,” Medscape, February 2, 2024, https://www.medscape.com/viewarticle/mega-malpractice-verdicts-against-physicians-rise-2024a10002bz?_gl=1*1idb6na*_gcl_au*MTYwNjExOTUzNy4xNzMzODUxNjY3.

National Practitioner Data Bank, U.S. Department of Health and Human Services, https://www.npdb.hrsa.gov/.