Asset Protection Liability insurance isn't enough

by Ken H. Vanway, PC attorney-at-law

It’s an unpleasant fact of life . . . about 25 percent of Texas physicians will face a medical malpractice claim this year. A few other scary facts . . . Texas has 61,000 attorneys and 80 million lawsuits are filed annually! Your assets are under attack. The lawsuit epidemic will not improve because we are dealing with two basic emotions—revenge and greed. What steps can you take to protect your family and your personal assets?

First, develop a wellness plan for your assets. Just as you encourage patients to take preventive measures to ward off health problems, it is prudent to organize your financial affairs and assets to guard against risks. Know what is and is not protected under the Texas homestead laws. Learn more about offshore trusts, Alaska trusts, family partnerships, partition agreements, and annuities. Finally, understand the costs of establishing and maintaining an asset protection plan.

Second, recognize that liability coverage can help protect your practice and your reputation, but it is not a complete solution. A judgment could exceed your policy limits or the cause of action could fall under the policy exclusions/limitations. Recent malpractice verdicts have included large jury awards against physicians—$13 million in a pediatrics case; $33 million in an obstetrics case; more than $1 million in an allergist’s case. Without planning, your hard-earned assets may be lost and it will be difficult to start over. It makes sense to put a “stop-loss” into place on your asset base—a fortress around your important assets. Also, establishing an asset protection program most likely will save you money on your insurance; perhaps you won’t need to purchase as much. Additionally, with less insurance and an asset protection plan in place, you become an unattractive target to those who would file frivolous lawsuits.

Third, be aware of your scope of risk. In addition to your exposure to medical malpractice lawsuits, other risk exposures include employment-related lawsuits by your employees against you, lawsuits for vicarious liability (ie, you are responsible for your partners, your employees), automobile accidents, joint ownership of property, coaching Little League, or participating on a board of directors. Factor in the additional risk to your assets imposed by income tax, capital gains tax, estate death tax, bankruptcy, and divorce, and you may find yourself running, not walking, to a board-certified estate planner who specializes in asset protection planning.

Seek a trained professional who specializes in this area. A team approach often works best—board-certified attorney, CPA, investment adviser, insurance professional, and financial planner. The costs involved in setting up an asset protection plan vary with the individual and the complexity of the case, but pale in comparison to the exposure you have every day you practice medicine, drive your car, or attend a board of directors meeting without a protection plan.

The Dallas County Medical Society and TMAIT will offer physicians a number of opportunities to attend asset protection seminars in 2002. Watch for further information in your DCMS publications and on the TMAIT Web site.

Ken H. Vanway is board-certified in estate planning and probate law.

Ó2001 TMLT. Reprinted with permission. This article is for general information only, and should not be used or referred to as primary legal sources nor construed as establishing medical standards of care. This article is published with the understanding that Texas Medical Liability Trust is not engaged in rendering legal services.