Problems With Malpractice Insurance Questionnaires: The Tip Of An Iceberg

Problems With Malpractice Insurance Questionnaires: The Tip Of An Iceberg

When asked about the risks of a malpractice law suit against a mental health practitioner, I respond with three generalizations based on my experience: 1) mental health professionals are almost never sued, 2) when they are sued, they rarely lose the law suit and 3) when they do lose, if the loss is covered by the carrier, the amount of the loss usually falls well within the policy limits.

Mental health professionals tend to be very risk-averse. Therefore, practitioners should be acutely sensitive to the proviso “if the loss is covered by the carrier.” A recent case, against a New Jersey psychiatrist illustrated this point. The basis of this lawsuit was that, among other things, the psychiatrist inappropriately touched my client. The carrier issued a so-called “reservation of rights” letter, informing the psychiatrist that it would not indemnify him (i.e., not pay) for any judgment stemming from the inappropriate touching. The carrier relied on a provision of the psychiatrist’s malpractice insurance policy which excluded coverage for sexual acts.

By this act, the carrier did two things: first, it concluded that certain conduct was sexual and second, it concluded that this conduct was the only thing the psychiatrist did wrong. In this case, I believe the nature of the physical contact was ambiguous and was not the only instance of malpractice. This vignette illustrates a dynamic of the practitioner-carrier relationship that is almost never discussed, that is, the insurance carrier is not your friend and from the very first report of a problem, part of what the carrier and its claims reps and attorneys do is determine the carrier’s liability for you and, at least in my experience, a prominent focus of this effort is not to find ways to extend a protective umbrella of coverage to the practitioner.

Getting a good handle on the relationship between you and your carrier is a preface for this article which deals with completing your application for malpractice insurance coverage. If this application is done carelessly or incorrectly, you may find yourself without coverage and won’t know it until it is too late.

A recent federal case (Coregis Insurance Company v. Baratta & Fenerty, Ltd., ___________ 3rd Cir 2001) deals with a malpractice suit filed against a law firm by one of its clients. The facts of this case are unimportant except to say that the client first contacted the attorney in 1979 and a law suit was filed in 1981. The law suit was dismissed in 1991 due to inaction by the plaintiff and the client was informed of this by the attorney in 1994! The attorney attempted to reinstate the case but the state supreme court finally denied this motion in April 1996.

Several days after the state supreme court issued its opinion, the attorney’s law firm applied for malpractice insurance for the period from May 1996 to April 1997 and apparently failed to list the above case. The policy included an exclusionary clause to the effect that coverage would be denied for acts, errors or omissions occurring before the policy period where the insureds knew or could have reasonably foreseen that their past behavior might form the basis of a claim against the law firm.

Not surprisingly, the original client sued the law firm and the malpractice insurance company refused to indemnify them. The law firm appealed and lost. The court’s reasoning is worth paying attention to. First, the court opined that a reasonable attorney would have recognized that he had a dissatisfied client who would undoubtedly take further action absent a “miraculous and unlikely turn around.” Second, among other things, in view of the age of the case, the attorneys employed a statue of limitations defense but the court opined that a reasonable attorney could not have been certain that the statute of limitations had expired.

Many of my mental health practitioner clients do not take sufficient care in responding to malpractice insurance questionnaires. They pay the premium and feel secure. The confluence of this case and the natural adversarial relationship between carrier and insured, strongly suggests that a review of past and current clients should be conducted prior to responding to the questionnaire. The extent to which such a review is formal, comprehensive, conducted by an arm’s length entity and is in writing may diminish or eliminate the problem.

The Risks of Sharing Office Space: You Are What You Appear To Be

The Risks of Sharing Office Space: You Are What You Appear To Be

On March 16, 2001 the United States Court of Appeals for the First Circuit (Massachusetts) decided a case that might have (and I stress “might have”) far-reaching implications for New Jersey mental health professionals. The case of Gosselin v. Webb, et al.¹ involves a group of attorneys being sued by a client. The client’s legal theory of liability is grounded in partnership law where partners can be held legally liable for each other’s actions, commitments, misdeeds, etc. Here, the defendant attorneys were an unaffiliated group who shared space and some expenses, not a partnership.

The Circuit Court used the construct of “partnership by estoppel” to reach the conclusion that the defendant attorneys were liable for one another as if they were a partnership. The elements of partnership by estoppel are (1) the would-be partner holds him- or herself out as a partner, (2) that such holding out is by the would be partner directly or with his or her knowledge, (3) that the plaintiff had knowledge of such holding out and (4) that the plaintiff relied upon the ostensible partnership to his or her detriment.

The meaning of “holding out” as a partnership is critical. What does it mean? The Court parses this term and develops several guideposts. First, in conversation with the client, the word “with”, as in, “I am in business with these others,” was used, implying membership in some kind of group. The ambiguity of this term was not enough to provide the defendant with protection. Second, there was a lobby directory (i.e., a sign) that listed names in a “partnership-like arrangement.” Third, one defendant directed the client to go to the group of unaffiliated lawyers to transact some legal business with another member. Fourth, there was communication between attorneys in the group about the client’s legal business. Fifth, another attorney in the group agreed to represent the client on another matter.

This analysis is very fact driven and there is no immediate generalization from space/expense sharing unaffiliated attorneys in Massachusetts and an unaffiliated group of space/expense sharing professionals in New Jersey. However, the occurrence of sharing office space and office expenses and of having signs, advertisements, and other displays is not uncommon among mental health professionals in New Jersey. In light of the Gosselin decision, the risk-averse practitioner who is sharing space and expenses with others, should consider taking certain precautions. These range from placing a disclaimer in the waiting room and at the bottom of bills stating that “the professionals in this office are independent practitioners and are not affiliated with one another,” to formalizing the group arrangement into a business entity such as the Limited Liability Company.

1) Gosselin v. Webb, Sullivan, Hurley and Field a/b/a Field, Hurley, Webb & Sullivan. 242 F.3d. 412 (1st Circuit, 2001).

Mediation Makes Sense But It’s Not For Everyone

Mediation Makes Sense But It’s Not For Everyone

The adversarial process applied to divorce and child custody is expensive. It costs a lot of money at a time when the parties should be conserving their financial resources. It costs a lot of emotional pain when the parties have already had enough pain. It leaves scars on the husband and wife but, more importantly, it leaves scars on the children. The difference between the adult scar and the child scar is that the child’s injury is magnified by a frustration of his or her developmental needs at the time.

For example, a very young child may need physical nurturance and safety more than anything else and much more than a twelve year old. However, if the parents are embroiled in an adversarial divorce, then these needs may be largely unmet or met in an excessive and bizarre fashion. The critical issue is that the “developmental window”, during which meeting or not meeting these needs is accomplished, does not remain open forever. The child passes through this stage and appears to have weathered the parents’ problems but, in fact, the child has not weathered these problems and his or her developmental trajectory will be changed forever. The effects of this change may be latent and may not appear until the teenage years or adulthood and probably will never be properly connected to the parental strife but the connection is there and will be obvious for all with the courage and perspicacity to look and see.

Contrast this to the plight of the teenage child of divorcing parents. His or her needs are very different and, for example, may reflect a struggle for autonomy and independence. One or both warring parent may need to lean or depend on this youngster, perhaps by discussing parental problems, and the teenager is pressed into service as a so-called parental child, i.e., the child who takes care of the parent’s needs. Children do not have to be asked to assume the role of parental child. In many cases they sense what is needed and respond accordingly. Never having resolved issues relating to independence and autonomy, this teenager may be the one who grows up to be excessively dependent or excessively independent such that adult relationships are problematic.

The bottom line is that the developmental needs of children cannot be put on a shelf until the parents finish fighting with one another. Children’s needs must be met within a reasonable time of their emergence.

If divorcing parents are not swayed by the needs of their children, then they might be influenced by their own financial and emotional needs. Divorce law has developed to the point that there are not many unknowns about who will get what asset or how much alimony will be paid. After one or two sessions with a client, I usually provide a comprehensive estimate of how the case will eventually settle. Some lawyers seem to not do this or to do it very poorly but, I would imagine that most competent attorneys would come to approximately the same point.

If the net assets in a case are $1,000,000.00 and the lawyers on each side differ in their allocations by 10%, then there is $100,000.00 at stake. A 50/50 division of this difference would yield $50,000.00 to each party. If one lawyer is particularly astute and effective, her client might wind up with $65,000.00. In this zero-sum game the other party would wind up with $35,000.00. Now, was it worth paying an attorney between $200 and $400 per hour (that’s $400 to $800 per hour for the couple), in order to wind up with a $15,000 victory? And what about the “loser”? Was the loss worth it?

In the meantime, while you are damaging your children and dissipating your assets, you are not getting any younger and your life is on hold in every conceivable way. Wouldn’t it be better for you and for those you care about to find a problem solving solution that had fewer negative side effects?

This is where I believe that mediation can help. I suppose some may feel that aspiring to limit the negativity and injury in divorce is “unrealistic” and that parties are “irrational” and not susceptible to the mediation intervention. I agree that resolution of an important and emotionally charged relationship can be difficult, especially because of the influence of factors and feelings that are not readily accessible to the parties. Launching into a mediation without dealing with these preliminary issues can have catastrophic results. The mediator has to be attuned to the varieties and levels of the mediation dynamics and use these to work toward a resolution. For example, I cannot claim that there is strong scientific evidence that mediation is less expensive than the adversarial process. This issue has not been studied in a satisfactory manner. However, it is common sense that parties working on a divorce resolution with one professional would incur less expense than parties who are paying two separate attorneys.

A successful meditation usually involves the parties retaining a separate attorney to review the memorandum of understanding, but this typically occurs at the end of the process and costs a nominal amount.