The headlines are hard to ignore. An $80 million verdict here, a $15 million settlement there, and before long, your phone is ringing with clients who want to know why they aren’t carrying more coverage.
It’s a fair question, and one that agency partners in the medical malpractice space are fielding with increasing frequency. To help producers make sense of the landscape, Mike Severyn, SVP of Claims, and Shep Tapasak, Chief Underwriting Officer, unpack why the answer to “Can’t we just buy more coverage?” is a lot more complicated than it sounds.
How We Got Here
The $1M per claim/$3M aggregate structure did not emerge from thin air. “These became the most purchased insurance limits decades ago because of both state regulatory requirements and contractual requirements,” says Tapasak. “Most hospitals require physicians to carry at least $1M/$3M in limits.” That contractual dynamic has made the benchmark remarkably sticky—but Tapasak notes it isn’t entirely static. “In recent years, we are seeing contractual requirements for increased limits,” he says. Still, the $1M/$3M structure remains the foundation of the market, and for good reason: It is where the data is deepest, the pricing most credible, and the risk pool most stable.
What’s Changed and What’s Driving It
For years, outlier verdicts lived in a relatively predictable range. “Years ago, losses were in the range of $1M to $3M, with outliers in the $3M to $6M range,” says Severyn. “Now, when we do lose at trial as an industry, we are seeing more verdicts between $10M and $100M.”
What’s fueling that shift? Severyn points to a convergence of forces: economic inflation, social inflation, the erosion of tort reform, and a deepening societal skepticism toward the healthcare system. “Jurors nowadays are unfazed by large numbers due to large life care plan reports, publicized corporate profits, publicized athlete salaries, rapidly increasing costs of medical care, and publicized large verdicts,” he explains. Add to that what he describes as genuine frustration with the healthcare experience—long waits, rising costs, less physician interaction—and you have a jury pool that is not inclined toward sympathy for healthcare providers. “Higher limits will not change jury attitudes toward healthcare providers or their dislike of the healthcare system,” Severyn says.
The Target on Your Back
Here is where the conversation gets uncomfortable for clients who believe more coverage equals more protection. It can, in some cases, do the opposite. “Higher limits can make providers more of a target,” says Severyn. “Plaintiff attorneys will often focus on the weakest witnesses and those with the highest limits.” In multi-defendant cases, the co-defendant carrying the most coverage can become the most attractive target. And in many states, limits are discoverable the moment a suit is filed, handing plaintiff counsel that information early. “If higher limits, then higher settlements,” Severyn adds. “Often on concerning cases, plaintiff attorneys will not take anything less than policy limits.”
The litigation psychology runs deeper still. Higher limits do not neutralize the underlying drivers of large verdicts; they do not improve communication between providers and patients, resolve diagnostic errors, or change the willingness of plaintiff firms to take cases to trial chasing the next big number. “Higher limits will not decrease plaintiff attorneys’ willingness to take cases to trial hoping for the next large verdict,” Severyn says.
The Actuarial Reality
Even setting aside the litigation dynamics, pricing a $10M primary policy is not simply a matter of scaling up. “Actuaries require credible data in order to derive rates with a high degree of accuracy,” explains Tapasak. “They need to have a large enough pool of claims for the data to be credible.” The problem is that the overwhelming majority of claims in the industry pool fall below $1 million, which means the data thins out considerably as you move up the severity ladder, making accurate pricing at higher limits genuinely difficult.
When carriers do price excess layers, they use what are called increased limits factors—percentage multipliers applied to the base premium. “If the $1M/$3M per physician policy had a premium of $1M and the increased limits factor for a $3M/$3M group shared excess is 0.50, that would mean the premium including the excess would be $1.5M,” Tapasak illustrates. The math works in theory, but the confidence behind it weakens as limits climb and the underlying “large claims” data becomes increasingly sparse.
What the Reinsurance Market Is Telling Us
Carriers do not price and hold all of this risk alone. Reinsurance is a critical part of the equation, and the reinsurance market is sending clear signals. “Reinsurers have become more cautious about offering high excess limits in recent years,” says Tapasak, “This is mainly due to the significant increase in outsized verdicts across the nation.” Some reinsurers have pulled back from supporting MPL carriers with significant hospital books altogether. That contraction at the reinsurance level directly constrains what primary carriers can responsibly offer. It’s not simply a business decision, it’s a structural limitation of the market.
The E&S Market and What Brokers Should Know
For limits above the standard primary layer, the excess and surplus market plays a significant role, particularly in the hospital and facilities space. “E&S is the dominant form of coverage in the hospitals and facilities space,” says Tapasak. For physicians, E&S comes into play as well, especially for higher-risk specialties. “Emergency medicine, radiology, OB, and others are more prone to higher verdicts and settlements, so there is often a need for rates significantly higher than admitted filings,” he adds. Brokers placing E&S coverage should also be aware that defense costs are sometimes inside the overall policy limits—a structural difference from admitted coverage that can have real consequences when a significant claim develops.
Who Should Be Having This Conversation Now
Not every client needs a proactive limits conversation, but some absolutely do, and agents shouldn’t wait for them to ask. Severyn is direct about which specialties warrant closer attention: “Ob-gyn, radiology, emergency medicine, and surgical specialties are specialties that may want to consider higher limits.” He also notes a market dynamic worth flagging to clients. “Some hospital systems have been pushing to have providers carry higher limits if they want to be on staff at certain hospitals,” he says. That credentialing pressure is only likely to grow as verdict sizes continue to climb.
On the flip side, Severyn’s experience reveals the wide range of risk tolerance that exists even within the same specialty. “In Michigan, for example, some ob-gyns carry $100,000 or $200,000 in limits. No kidding. Others carry $1M.” That variance, he notes, often comes down to individual financial condition, personal risk tolerance, and whether the provider believes their personal assets are genuinely at risk.
As an agency partner, understanding where your client sits on that spectrum is essential to having a productive conversation.
Rethinking ‘Good’ Venues
Tapasak has a candid message for producers who push back on excess limit pricing in what they consider favorable venues. “Most MPL specialists realize that excess limits may be very costly due to concerns around outsized verdicts,” he says. “Sometimes we do get pushback for our pricing in the ‘good venues.’” His response is grounded in experience: “We have learned over the past several years that even conservative venues and those with damage caps can be problematic.”
Geography is no longer the reliable buffer it once was, and pricing that reflects that reality is not a carrier being difficult—it’s a carrier being honest.
The bottom line for agents and brokers is this: When a client calls rattled by a headline verdict and asking for a $10M policy, the job isn’t to simply find them more limits. It’s to help them understand what more limits actually does (and does not) accomplish. As Severyn and Tapasak make clear, the market has its constraints and the litigation environment has its logic, and the right answer for your clients lives somewhere in the nuance between the two.
