Recent work using Texas closed claim data finds that physicians are rarely required to use personal assets in medical malpractice settlements even when plaintiffs secure judgments above the physician's insurance limits. In equilibrium, this should lead physicians to purchase less insurance. Qualitative research on the behavior of plaintiffs suggests that there is a norm under which plaintiffs agree not to pursue personal assets as long as defendants are not grossly underinsured. This norm operates as a soft constraint on physicians. All other things equal, while physicians want to lower their coverage, they do not want to violate the norm and trigger an attack on their personal assets. This constraint should be less effective when physicians have other ways to shield their assets, such as through large personal bankruptcy exemptions like those available in Texas. Settlement data from the National Practitioner Data Bank indicate that settlements in Texas are abnormally low, just as they are in other jurisdictions with unlimited homestead exemptions in bankruptcy. Consistent with theory, we find that more generous exemptions are also associated with lower insurance prices and lower levels of insurance coverage. These results suggest that the large "haircuts" and low insurance limits observed in the Texas data may be driven by Texas's generous bankruptcy provisions. At a minimum, Texas is not generally representative of other jurisdictions. This weakens the case for extrapolating conclusions from Texas data to other jurisdictions.

Additional Metadata
Keywords Empirical Legal Studies, Blood Money, Tort Law, Medical Malpractice Litigation, Doctors, Insurance, Settlements, Incentives, Personal Bankruptcy, Homestead Exemption
JEL Insurance; Insurance Companies (jel G22), Personal Bankruptcy Law (jel K35), Litigation Process (jel K41)
Persistent URL
Journal Connecticut Insurance Law Journal
Klick, J.M, Helland, E., & Baker, T.B. (2016). Everything's Bigger in Texas: Except the Medmal Settlements. Connecticut Insurance Law Journal, 22(1), 1–47. Retrieved from