Lawsuit Raises Questions About APA Liability Insurance Program

"We all know that delusional or paranoid patients might pursue a malpractice suit beyond its economic value," is an odd comment, considering it came from a handbook distributed 10 years ago for psychiatrists who participate in the American Psychiatric Association's professional liability insurance program. The statement lies at the heart of a lawsuit that is wending its way through an Illinois court and threatens to upset the way the APA administers its liability insurance programs.

"The better policies, such as that offered by the APA, stipulate that the insurance company must obtain the consent of the insured psychiatrist before entering into an out-of-court settlement," the handbook continued. "The relevant clause in such policies is usually referred to as an 'unlimited consent to settlement,' which really means that the insured has the relatively unlimited right to refuse a settlement proposed by the insurance company."

Those representations, and others like them, have created an ongoing imbroglio that has ensnared the APA. In an ironic twist, the accused became the accuser, and the questions raised are whether the APA's liability insurance program is being administered for the benefit of members or for the financial interests of the insurers and others who sell it.

Amending a complaint he filed more than a year ago in a Cook County circuit court, Bennett B. Braun, M.D. has now sued the APA, as well as various entities that administer the liability insurance program it offers members, in Braun v Bollinger, Ruberry and Garvey (Case No. 99 L 06876). Originally, the complaint only named the insurers, risk managers and Braun's former defense attorneys.

Braun now alleges that his shattered career is the direct result of the APA, the other insurance program sponsors and the insurance companies taking actions that protected their own interests. Previously, one of the nation's most prestigious psychiatrists, his career came to an end following accusations that his renowned dissociative identity disorder center engaged in below-standard care.

An insured member under a number of professional liability policies through the years, Braun alleges that when it came time to defend him in a notorious case involving a recovered memories retractor, he was abandoned by the APA and then forced to settle without his consent.

The $10.75 million payout in 1997 led to a cascade of misfortunes according to the complaint, including the loss of his practice, damage to his reputation and economic damages alleged to be in the millions. Braun's license to practice medicine was suspended for two years in 1999, and he was expelled from the Illinois Psychiatric Society and the APA in March this year.

"The Illinois Psychiatric Society Ethics Committee and its Council recommended expulsion, after Dr. Braun was found to have provided incompetent medical treatments unsupported by usual standards of practice; violated ethical boundaries with the patient, including inappropriate sexual behavior and exploitation; and seriously breached patient confidentiality with the media," an APA press release stated. "Like any profession, psychiatry unfortunately will always have a few members whose behavior is unethical," then-APA president Allan Tasman, M.D., added in the press release.

Now, however, it is the APA that is being accused of unethical conduct. It's not just Braun who is critical, either.

In an interview with Psychiatric Times, Mary Kenney, a lawyer with Johnson & Bell, said the insurance companies and administrators that provide the APA's coverage act inconsistently, reflecting either an inability to accurately assess the financial and legal risks presented by claims or a discomforting predilection to put their own economic interests ahead of those of the insureds.

Kenney was one of the attorneys who represented Debra Davy, a St. Paul, Minn., defense attorney accused of legal malpractice after a jury returned a multimillion dollar verdict in a recovered memory case involving Diane Humenansky, M.D. In February, a federal district court exonerated Davy in a case brought by insurers.

"It's horrible to attack the people they're trying to protect," Kenney said, "I was outraged at what they did to Debra Davy. She and members of her firm did the best job they could to defend that client, and then the insurers attacked her on a personal level."

At first, according to Kenney, the insurers and administrators tried to assert that Humenansky engaged in intentional acts, hoping to exclude from coverage the malpractice claims being made against her. Then, despite the prospect of significant liability exposure, they declined to follow Davy's settlement recommendations. Finally, Kenney said, they blamed Davy for their losses.

Davy, now retired, spent years defending psychiatrists covered by the APA liability program, winning case after case. But she told PT that after the loss in Humenansky, the relationship with the insurers and risk managers soured."I've spent a long time trying to figure out why they sued me. The easy answer is for money," Davy said. "I felt betrayed. I also felt angry. I also felt determined that I was going to try the case they brought against me and win it. That was because I had done a tremendous job for them for years."Davy also said that the way the Humenansky cases were handled defied explanation. "I had never seen anything like it in my life. No one could have won these cases. I predicted how much those cases would have gone for, and I could have settled all of them for less than that."The APA and liability program representatives declined repeated requests from PT for interviews regarding the Braun case. Alan I. Levenson, M.D., president and CEO of the Psychiatrists Purchasing Group Inc., a separate entity that arranges the insurance liability program for APA members, deferred to a defense attorney, declining to discuss the liability program or to respond to the criticisms leveled against it.The attorney, Andrew Ellbogen of Chicago's Landau, Omahana & Kopka law firm, told PT he was incapable of discussing the insurance program generally, and that he would only make limited comments about Braun's litigation."My clients deny the allegations in Braun's amended complaint," Ellbogen said. "We are confident that motions currently scheduled to be heard in October will either result in the case being dismissed or substantially pared down in scope."According to Howard Brinton, the Chicago lawyer representing Braun, however, the statements made in the psychiatrists' handbook-copies of which are attached to the amended complaint-induced psychiatrists to choose the APA liability insurance program over others by promising to honor physician decisions regarding settlement. More important, Brinton told PT, it showed that the APA recognized that there was a potential "for baseless suits" brought by mentally ill individuals who could confound the facts."The APA advertisement makes it clear that they understand the difference inherent to cases brought by mentally ill individuals," Brinton said. "The APA uses the lack of a real hammer clause as a promotional gimmick, but then it goes even further than that. It goes to the very type of case that was brought against Braun."

Current materials available on the APA's liability program Web site continue to promote its consent clause.

"Other insurance carriers may attempt to dispose of meritless claims, simply paying a claimant to go away," according to the Web site. "But with the coverage provided by the Program, that is not the case. We consider your input to be a vital part of the decision of how to proceed with a claim, whether it be an attempt to negotiate a settlement or to prepare for defending the case at trial."

The site encourages APA psychiatrists to "compare us to the competition" and promises that the program's consent to settle provision contains no penalties for refusing.

"Still in effect in some other policies issued by other carriers is a so-called 'hammer clause,'" the site explained. "If an insured refused to consent to a settlement and then a jury found the physician guilty of negligence, that insurer can refuse to pay the amount of the award which was over and above the settlement figure discussed. That practice is hardly in the best interest of conscientious physicians concerned with defending their reputation and practice, and that is why there is no 'hammer clause' in the Program's policy."

For Braun, those promises and others like it sound hollow, considering his allegations that they settled a questionable case against his wishes. In a recent interview with PT, Braun said, "I'm looking forward to taking on the APA and the professional liability program it sponsors. We've got them dead to rights."

Program statistics for 1998 show that 1% of claims against psychiatrists were settled during trial, while another 1% of plaintiffs' verdicts were settled after the trial. Twenty-nine percent of cases were settled before trial, while 5% of the cases resulted in a defense verdict. The remainder of the cases were either dismissed voluntarily, dismissed by the court or dismissed because of lack of prosecution, according to an APA spokesperson.