Abstract

Medical malpractice insurance policies customarily contain a “cooperation” clause requiring insureds to cooperate with the insurer's efforts to defend the insured against a claim. A common stipulation in this clause forbids the insured from “admitting liability” to an injured or harmed party. Health professionals often understand this clause to have a chilling effect on the truthful disclosure of medical error, which is morally required of physicians when they know that a harm-causing error has occurred. This paper offers a two-part response to the fear that medical error disclosure might result in a denial of malpractice insurance coverage. Part one describes various legal precedents wherein insurers successfully invoked the cooperation clause to deny coverage in instances of liability admission. This paper shows, however, that the legally sanctioned reasons for denying coverage in these cases address factors other than an insured's truthful and honest disclosure of what happened to a claimant. Consequently, these cases do not support the belief that legal precedents discourage the truthful disclosure of harm-causing medical errors. Part two of this paper proposes that the cooperation clause's prohibition of admission of liability in instances of medical error disclosure might well be unenforceable, and that the clause might not even be actuarially sound.

Introduction

The appearance of the Institute of Medicine's 2000 report, To Err Is Human, ¹ marked a watershed in the patient safety movement in the United States. Galvanizing the attentions of the lay public, health professionals, and various regulatory and legislative groups, the report described the extent of the problem of medical errors and laid out a fairly elaborate set of recommendations whereby patient safety measures could be dramatically improved.

Other than remarking that a serious medical error “if discussed at all, is discussed only behind closed doors” (p. ix), the report did not elaborate on the health professional's ethical duty to disclose harm-causing errors, perhaps because the American Medical Association (AMA) had already done so nearly 20 years before. Section 8.12 of the AMA's Code of Medical Ethics: Current Opinions clearly states,

It is a fundamental ethical requirement that a physician should at all times deal honestly and openly with patients. Patients have a right to know their past and present medical status and to be free of any mistaken beliefs concerning their conditions. Situations occasionally occur in which a patient suffers significant medical complications that may have resulted from the physician's mistake or judgment. In these situations, the physician is ethically required to inform the patient of all the facts necessary to ensure understanding of what has occurred. Only through full disclosure is a patient able to make informed decisions regarding future medical care.

Ethical responsibility includes informing patients of changes in their diagnoses resulting from retrospective review of test results or any other information. This obligation holds even though the patient's medical treatment or therapeutic options may not be altered by the new information.

Concern regarding legal liability which might result following truthful disclosure should not affect the physician's honesty with a patient. ²

This statement nicely captures the moral rationale for error disclosure: Patients have a categorical right to a reasonable disclosure of truthful information about their health conditions, to the extent that information is available to and known by their treating professionals. ^{3 – 6} Historical anecdotes amply demonstrate, however, that when a patient's adversity results from a medical error, the truth-telling and disclosure obligations described in section 8.12 are frequently disappointed, and primarily for the very reason that the section identifies: the professional's concern regarding legal liability. A 2002 study of disclosure practices reported from more than 200 hospitals stated,

More than half of respondents reported that they would always disclose a death or serious injury, but when presented with actual clinical scenarios, respondents were much less likely to disclose preventable harms than to disclose nonpreventable harms of comparable severity. Reluctance to disclose preventable harms was twice as likely to occur at hospitals having major concerns about the malpractice implications of disclosure. ⁷

That finding ought not be surprising. A considerable body of literature attests to how the threat of a malpractice action, along with feelings of inadequacy and incompetence, causes immense anxiety among health professionals, and how they adopt a variety of defensive mechanisms—including rationalization, distortion, blame shifting, and omitting mention of the error to the harmed party—when faced with the commission of a harm-causing error. ^{8 – 11}

In addition to the fear of inviting a lawsuit by truthfully disclosing error to the harmed party, another factor that health lawyer Jack Schroder described as “more subtle yet potentially more damaging” is also present. ¹² It is that many malpractice insurance policies contain a clause that states, “The insured shall not, except at his own cost, make any payment, admit any liability, settle any claims, assume any obligations or incur any expense without the written consent of the company.” ¹³ This clause, which obligates the insured to cooperate with his or her insurer and desist from cooperating or colluding with the injured party, has a chilling effect on many error disclosures. The frank admission of a harm-causing error—e.g., “Mrs. Jones, an error occurred in your care that was responsible for the harm you experienced, and we apologize for the harm it caused”—is a slam-dunk admission of liability. Because it violates the cooperation clause, the honest disclosure of harm-causing error risks the possibility that the insurer will refuse to cover whatever associated costs, principally from a lawsuit, might occur to the insured from the error.

As an illustration that the cooperation clause is indeed taken seriously, consider the following: About 2 years after the Institute of Medicine's report, To Err Is Human, appeared, I posted an article on Emory University's Center for Ethics Web log that not only urged the disclosure of error, but also recommended that the professionals involved in the error request forgiveness from the harmed party. A colleague referred my article to a senior medical administrator, who responded almost immediately with the following:

An admission of fault exposes the doctor and/or institution to damages per se. And the medical malpractice...insurance policies usually provide that an admission of the insured of error voids coverage for the related claims for damages. In today's world, that situation is simply not one that a doctor or hospital, etc., can accept. In fact, a physician will not be admitted to the staff of most hospitals without evidence of effective coverage under an adequate med mal policy. ¹⁴

The physician who wishes to act ethically and disclose a harm-causing error is therefore confronted by the possibility of financial, and, perhaps professional, disaster. In what follows, however, I argue that (1) reported cases where insurers successfully denied coverage to insureds who violated the cooperation clause exhibit factual situations that bear no resemblance to a health professional's disclosure of harm-causing medical error, as morally required; (2) as applied to the truthful disclosure of medical error, the cooperation clause might be unenforceable; and (3) as a strategy for conserving the insurer's loss reserves, the practice of concealing error might be entirely counterproductive, i.e., concealing error might cost the insurer more than would truthful disclosure of harm-causing error. I end this article by describing how various States have enacted legislation that has removed certain fears connected with admitting error and apologizing to the harmed party. Therefore, a more felicitous legal environment may be emerging that encourages professionals to conduct harm-causing error conversations in a patient-centered way.

Part I: Some illustrative cases

A physician's admission of liability to a harmed or injured party appears to constitute a theoretical violation of the cooperation clause. Yet, I have been unable to locate any case in which an insurer successfully denied coverage to an insured party whose ethical code required truthful error disclosure and who did so. There are cases where insurers have successfully denied coverage for an insured's violation of the cooperation clause, but these cases exhibit fact situations that bear no resemblance to an insured health professional's promptly admitting fault to a patient who has been harmed from error. While health professionals might still choose to conceal error information from patients or an insurer might try to deny coverage to the health professional who admits liability, an historical review of legal precedents does not support the belief that coverage revocation is a likely response from an insurer to a health professional's disclosing harm-causing error. Let us examine some of these cases.

A fairly representative group of cases illustrates situations wherein an insured admits liability to an injured party, but then makes no effort to inform or cooperate with his or her insurer's attempt to manage the injured party's subsequent claim. A commonly cited example—indeed, one of the seminal cases—is the 1955 case of Pennsylvania Insurance Company v. Horner. ¹⁵ Mr. Horner, who was one of the insurance company's insureds, was driving his vehicle when it struck a government-owned mail truck that was occupied by a postal worker named Kerr. Mr. Horner was eventually charged with hit-and-run driving. Fearing federal prosecution, he signed a statement admitting that the accident was his fault and, thus, ostensibly violated the cooperation clause. Pennsylvania Insurance, however, only became aware of the mishap when, some 5 months later, Mr. Kerr brought suit. The insurance company contended that Mr. Horner violated the cooperation clause not so much by admitting liability, but by failing to give the company adequate notice of the accident, as stipulated by the policy, and failed to comply with any of the requirements of the clause (e.g., assist in investigations, answer questions, etc.). Upon review, the Supreme Court of Tennessee found in the insurance company's favor, not so much for Horner's admission of liability but because “no notice whatever was given by the insured Horner, nor did he cooperate with the company in any particular.”

Another group of cases involves an insured's giving his insurer notice of an incident, but then compromising the insurance company's efforts to defend the case. An example of this occurred in Royston Moore v. General Accident Insurance Company and Donald Swofford. ¹⁶ Mr. Swofford was an architect hired by Mr. Moore to refurbish and remodel Mr. Moore's home. Mr. Moore brought suit against Mr. Swofford for negligent acts and breach of contract. Mr. Swofford's insurer, General Accident Insurance Company of America, loyally defended him throughout the investigation leading up to trial. On the day before the trial and against his insurer's wishes, however, Mr. Swofford entered a motion in court that admitted his wrongdoing. Ten days later, when the court awarded Mr. Moore damages in the amount of $160,000, Mr. Swofford promptly declared bankruptcy. Faced with paying the entire damage award, General Accident refused, claiming that Mr. Swofford had cogent defenses to Mr. Moore's charges but that Mr. Swofford's admission of guilt precluded the insurance company's defending the claim and possibly conserving its losses. Significantly, Mr. Swofford did not privately confess wrongdoing to Mr. Moore, but made his admission in court. Consequently, while this case certainly illustrates an admission of liability that violated the cooperation clause, the insured's actions and intentions did not appear to be motivated by ethical obligation nor did they occur within the privacy of a professional-client relationship. Rather they smacked of a carefully conceived plan intended to make it impossible for Mr. Moore to recover the damages he was awarded. Ultimately, General Accident was not obligated to pay, largely because Mr. Swofford sabotaged his insurer's efforts to defend his claim.

A third group of cases shows that even a straightforward violation of the cooperation clause might not be enough to enable the insurer to revoke coverage, as a number of jurisdictions have held that the insured's actions must make the insurer's attempt to defend itself unreasonably difficult. Various courts have found that the insurer might fail to prove that a breach of the cooperation clause occurred if—

• an insurer fails to inform an insured of his or her obligation to attend depositions or trial;
• the insured can show that his or her failure to comply with the cooperation clause was due to mistake and not bad faith; or
• the insured can show that his or her cooperation with the insurer would be immaterial to the insurer's defense. ¹⁷

For example, in St. Paul Fire and Marine Insurance Company v. Albany Medical Emergency Center, St. Paul unsuccessfully invoked the cooperation clause to deny coverage and its obligation to defend Albany Medical against a series of negligence allegations. ¹⁸ St. Paul argued that Dr. George Rawlins, who was covered under the policy and was on staff at the center, did not respond to its investigative efforts to locate him and that his failure to cooperate in any way thus voided the emergency center's coverage. In point of fact, however, Dr. Rawlins was not named as a defendant in any of the negligence actions filed against the medical center. This prompted the court to rule that although Dr. Rawlins was an insured of St. Paul's, he had no duty to cooperate since he had no material relationship with St. Paul in this litigation. The court simply refused to read the cooperation clause “so broadly as to require cooperation of anyone named in a policy of insurance issued by the insurer, regardless of the holder's relationship to the lawsuit.” Dr. Rawlins's participation in the lawsuit was immaterial and thus could not, in the court's opinion, adversely affect the insurance company's defense.

These cases show that insurers have successfully invoked the cooperation clause to deny coverage when an insured's lack of cooperation amounted to sabotaging the insurer's efforts to defend against a claim. No case illustrates that a truthful disclosure of what happened, in and by itself and especially as it might occur within the ethical ambit of a professional-client relationship, resulted in an insurer's revoking coverage. Indeed, as we proceed to part two of this article, there is reason to think that the cooperation clause would not even be enforceable in instances of medical error disclosure.

Part II: Ethical reflections on the cooperation clause

Conclusion

It remains possible that a health professional who discloses harm-causing error, despite a stipulation in his or her malpractice policy that he or she refrain from doing so, will find the insurer refusing to provide coverage. A review of the legal literature up until now, however, does not offer compelling evidence that fuels fear of that likelihood. Furthermore, a growing body of research indicates that the truthful and honest disclosure of harm-causing error may well prove a cost-effective rather than a cost-prohibitive strategy for carriers. One hopes that these arguments and speculations will be further discussed and studied among health professionals and their insurance carriers. Obviously, the eradication of needless fears that compromise the truthful disclosure of harm-causing errors would serve to advance the development of patient-centered sensibilities, which is a very good thing. It would, furthermore, be a heartening development to find that the financial costs connected with error disclosure are significantly contained by the implementation of patient-centered ethical practices.

Acknowledgments

Preparation of this article was supported by funds from grant 1U18HS11918-01 that was awarded by the Agency for Healthcare Research and Quality to the Georgia Hospital Association Research and Education Foundation. The opinions expressed in this article are the author's and not necessarily those of the Georgia Hospital Association or the Agency for Healthcare Research and Quality.

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