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By Leo Carroll | Senior Vice President, Head of US Healthcare, Berkshire Hathaway Specialty Insurance

Healthcare institutions, from academic medical centers to outpatient facilities and other specialty treatment providers, face a large potential exposure to litigation – and not just for medical outcomes. The plaintiffs’ bar is applying creative and aggressive approaches against healthcare entities on various fronts. Areas plaintiffs’ attorneys are focusing on include medical billing, access to care, healthcare equity and drug pricing. A telling and concerning statistic about the state of healthcare lawsuits in 2024 was reported by Forbes: One in three medical providers faces litigation for malpractice during their care. Clearly, healthcare organizations are facing increased pressure in the areas of risk management, litigation defense and reputational concerns.

The steady filing of lawsuits in healthcare produces several regrettable consequences, well beyond the financial impact on care providers. Plaintiffs’ attorneys’ tactics and juror misperceptions both contribute to fostering negative bias against the healthcare industry. The plaintiffs’ bar has become skilled at pushing an “us vs. them” mentality that casts healthcare organizations inaccurately. The phenomenon of aberration verdicts – those exceeding $10 million – is raising risks for all industries, including healthcare. In a study of outsize verdicts from 2013 through 2022, medical liability cases accounted for more than 20% of aberration verdicts.

Plaintiffs’ attorneys’ tactics

A trial strategy with some history is the “reptilian brain theory,” which is intended to trigger an emotional response that causes jurors to see defendant companies as threats to safety. Another tactic is the proliferation of advertising large awards to plaintiffs. Billboards and television ads from personal injury law firms touting big verdicts are ubiquitous. These awards are often reduced on appeal or overturned, yet most states do not require plaintiffs’ attorneys to adjust such advertisements to reflect those results. So far, seven states have enacted legislation to prevent misleading legal advertising. They are Florida, Indiana, Kansas, Louisiana, Tennessee, Texas and West Virginia, according to the U.S. Chamber of Commerce’s Institute for Legal Reform.

Another trend in high-value cases overall, not just those involving healthcare defendants, is third-party litigation funding (TPLF). Numerous hedge funds and private equity firms have quietly amassed billions of dollars of capital to deploy in supporting lawsuits. The idea is simple and, on the surface, aligns with funds’ objective to create value for investors. In TPLF, investors stand to make significant returns if plaintiffs are successful.

The downsides, from a defense point of view, are many. TPLF turbo-charges litigation, prolonging cases that might fail on their own much earlier and facilitating ever-higher demands for compensation. Verdicts are enlarged, the settlement floor is raised, and sensational cases attract extensive news coverage, even though more than 80% of defensible malpractice claims are dismissed without settlement, according to Forbes. In addition, a recent Institute for Legal Reform report warns that TPLF threatens the integrity of the court system and can be detrimental to plaintiffs, contrary to litigation funders’ claims.

Judges in some federal district courts – notably California, Delaware, Maryland, New Jersey and Ohio – have ordered disclosures and inquiries on litigation funding, but many jurisdictions have not. Since 2018, only five states – Indiana, Louisiana, Montana, West Virginia and Wisconsin – have enacted legislation requiring disclosure of third-party litigation funding sources.

Approaching defense differently

To combat these legal trends, healthcare institutions are considering new ways to defend against litigation. Areas of opportunity for a new approach to healthcare defense include:

• Emphasize the standard of care as the basis for deciding a verdict. If the defense focuses jurors’ attention on whether a plaintiff was treated according to the medically accepted standard of care, jurors are less likely to be persuaded into a verdict based on sympathy for the injured plaintiff. Discomforting as this fact may be, some events in healthcare settings are outside of anyone’s control.

• Don’t cede valuation of damages to plaintiffs’ attorneys. A common tactic of the plaintiffs’ bar is to suggest a figure for compensation, even if it has little basis in the facts of the case. This tends to “anchor” jurors to a number that can be difficult for defense attorneys to sever. Instead, the defense is strategically and proactively engaging jurors on a view of damages even if strong liability defenses exist.

Compensation culture obscures economic reality

Unfortunately, our society has developed a culture of blame and compensation that obscures the economic reality that litigation raises costs for everyone. The financial impact of litigation is not limited to the courtroom. Aberration verdicts and expensive litigation increase the expenses borne by businesses, communities and consumers.

Most jurors do not see the many challenges that healthcare businesses struggle to balance. Healthcare organizations bear significant expenses from the volume of litigation, not only in direct costs but also in indirect ways. Medical professional liability policies do not provide coverage for all expenses arising out of litigation. Healthcare policyholders bear a considerable share of costs, including self-insured retentions, the indirect costs of time defending lawsuits and reputational damage. Insurance premiums factor in losses paid by insurers. Who pays for the costs that litigation generates? In a word, everyone. Research by the Institute for Legal Reform found there is a “tort tax” of more than $3,600 imposed on every U.S. household.

Taking positive action

Healthcare risk professionals and their risk advisors are working very hard to neutralize negative perceptions of the industry through collaboration and risk mitigation. Healthcare professionals do not want to see any patient harmed, whether the reason is within the control of the care team or fully outside it.

A way to help change perceptions is by partnering with organizations that aim to strengthen the patient/caregiver relationship. Two such organizations include the Collaborative for Accountability and Improvement and the Schwartz Center for Compassionate Healthcare. Each focuses on managing risk by promoting effective communication and listening, emotional support, mutual trust and respect, patient and family involvement in healthcare decisions, and treating patients as whole people.

Berkshire Hathaway Specialty Insurance also offers customized risk management support for medical professional liability policyholders. Together, we aim to assist our policyholders in managing their risks and mitigating the factors that impede the delivery of quality care.

For more information about healthcare risk management solutions and resources, please visit www.bhspecialty.com.

Leo Carroll is Senior Vice President and Head of US Healthcare at Berkshire Hathaway Specialty Insurance. He is responsible for the strategic growth and performance of the group’s Healthcare Professional Liability products.

Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial property, casualty, healthcare professional liability, executive and professional lines, transactional liability, surety, marine, travel, programs, accident and health, medical stop loss, homeowners, and multinational insurance. The actual and final terms of coverage for all product lines may vary.  It underwrites on the paper of Berkshire Hathaway's National Indemnity group of insurance companies, which hold financial strength ratings of A++ from AM Best and AA+ from Standard & Poor's. Based in Boston, Berkshire Hathaway Specialty Insurance has offices in Atlanta, Boston, Chicago, Columbia, Dallas, Houston, Indianapolis, Irvine, Los Angeles, New York, Plymouth Meeting, San Francisco, San Ramon, Seattle, Stevens Point, Adelaide, Auckland, Barcelona, Brisbane, Brussels, Cologne, Dubai, Dublin, Frankfurt, Hong Kong, Kuala Lumpur, London, Lyon, Macau, Madrid, Manchester, Melbourne, Munich, Paris, Perth, Singapore, Sydney, Toronto, and Zurich.

The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service. Any description set forth herein does not include all policy terms, conditions and exclusions. Please refer to the actual policy for complete details of coverage and exclusions.