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$4.8 billion. That’s how much was paid in medical malpractice settlements in 2023.
If there’s one thing you can say about America, it’s that we’ve got a taste for litigation. We sue over all kinds of things, like hot coffee spills, faulty gadgets, and even a bad haircut.
For physicians, this lawsuit culture is less comical and more distressing.
Medical malpractice suits are part of the professional landscape, sometimes unavoidable, no matter how careful or skilled a doctor might be.
But beyond the professional fallout, many doctors worry about something even more personal: can a malpractice lawsuit put their assets, like their house, savings, or investments, at risk?
Some folks out there believe it’s only fair to go after a doctor’s personal assets if they think the doctor caused their unfavorable outcome. The idea of “eye for an eye” runs deep. When a patient feels wronged, the natural, visceral reaction can be to want justice in the form of financial compensation, sometimes by any means necessary.
That’s when some attorneys shift from advocates to sharks, sniffing for blood in the water, eager to push past insurance limits and seize what’s in a doctor’s portfolio.
Thankfully, our nation’s laws don’t leave doctors exposed like sitting ducks. While no system is flawless, legal protections generally keep physicians’ personal assets shielded from malpractice claims, giving them a fighting chance to preserve what they’ve built.
That doesn’t mean the risk is zero, but it does mean the law recognizes the importance of fairness, not just to patients, but to the doctors who dedicate their lives to care.
Also read: How to Be an Effective and Ethical Expert Witness
America’s Love Affair with Litigation
Malpractice lawsuits aren’t exactly news for physicians. According to established data, around 7.4% of doctors face a malpractice claim each year.
That might seem like a small fraction, but the financial and emotional weight of even a single claim can be enormous.
The average malpractice payout in the U.S. is roughly $420,000, but that figure hides a wide range, from claims dismissed without payment to multi-million dollar verdicts in catastrophic injury cases.
Image Source: Miller And Zois
The truth is, many suits settle for much less than the amounts initially demanded. Still, when a verdict exceeds the physician’s malpractice insurance policy limits, one question rings out loud and clear: Who pays the difference?
There’s a public perception — sometimes fueled by sensational news stories or courtroom dramas — that doctors can be stripped of their homes, retirement savings, or other personal assets to cover these damages. But in reality, that’s hardly ever the case.
Malpractice Insurance: Your First and Biggest Shield
Doctors aren’t typically left to fend for themselves financially in malpractice suits. Most maintain malpractice insurance policies specifically designed to cover claims arising from their professional work.
In the U.S., 7 states (Colorado, Connecticut, Kansas, Massachusetts, New Jersey, Rhode Island, and Wisconsin) require a minimum level of malpractice insurance, while 11 other states (including Indiana, Nebraska, New Mexico, New York, Pennsylvania, and Wyoming) require minimum level insurance for physicians to qualify for liability reforms.
On average, malpractice insurance policy limits range from $1 million per claim to $3 million aggregate annually. This insurance is the first line of defense. It covers legal defense costs, settlements, and judgments up to the policy limits.
But what happens if a jury awards damages that exceed those limits? Can the plaintiff’s attorney then come knocking on the doctor’s personal bank account?
It depends, and this is where the law and asset protection strategies come into play.
Read more: What Is a PLLC and How Is It Different From an LLC?
When Judgments Exceed Insurance
If the malpractice judgment exceeds insurance coverage, patients can try to collect the difference from the physician personally. But several factors can limit this possibility:
State laws
Varying state laws decide how malpractice judgments are enforced. Some states cap non-economic damages like pain and suffering, which can keep judgments in check.
Personal asset protections
Having protections in place, like homestead exemptions or retirement account protections, can shield certain assets from creditors and litigators alike.
Business structures
Professional corporations or limited liability companies (LLCs) can provide a legal firewall between personal and professional assets.
Hands-off
Certain assets are simply difficult to touch. For example, funds in qualified retirement accounts like 401(k)s or IRAs often have strong creditor protections under federal law.
Still, no protection is absolute. Although rare, a particularly large judgment combined with poor planning can put personal assets at risk.
The Role of State Law
The degree to which your personal assets are safe often depends on where you practice and live. Each state has its own rules for creditor claims and malpractice suits.
For instance, Florida has a generous homestead exemption, protecting a primary residence from creditors regardless of its value. Texas also offers strong protections for homesteads and certain personal property.
On the other hand, some states like California provide robust malpractice damage caps but have different rules for asset protection.
Consider a Dr. A in Utah (a state where it recently became nigh impossible for doctors to lose personal assets in a malpractice lawsuit). Now, imagine they receive a malpractice judgment of $2.5 million but have only $1 million in insurance.
The patient tries to collect the extra $1.5 million personally. Dr. A had already structured their finances with a strong homestead exemption protecting their primary residence and had most of their savings tied up in a 401(k).
In this case, the patient will only be able to collect a judgment lien on Dr. A’s non-exempt assets, but cannot force a sale of their home or tap into their retirement funds.
In contrast, a Dr. B from a state with fewer protections and significant assets in a personal brokerage account is on thin ice. After losing a malpractice case that exceeds insurance coverage, creditors will be able to levy on their investments and garnish wages until the judgment is satisfied.
This example highlights how the outcomes vary widely based on preparation and legal context. Because even if the chance of losing personal assets is slim, it’s not impossible, and the more protections you’ve got in place, the better off you’ll be.
In case you missed it: What Types of Insurance Does a Resident Physician Really Need?
Asset Protection Strategies for Physicians
The good news is that doctors don’t have to walk into this vulnerable. With a thoughtful approach, personal assets can be protected.
Some common and effective strategies include:
Incorporating under the right structure
Many doctors form Professional Corporations (PCs) or Professional LLCs, which separate business liabilities from personal assets.
Using trusts
Irrevocable trusts can move assets beyond the reach of creditors, although they must be set up well before any claims arise.
Taking advantage of exemptions
Maximizing protections like homestead exemptions and creditor protection laws for retirement plans is always a safe bet against the rising tide of malpractice litigation.
Maintaining adequate insurance
It might feel expensive, but increasing policy limits reduces the chance of personal exposure. This is especially true if you work in a high-stakes surgical specialty.
Regular financial reviews
Always prioritize working with attorneys and financial planners who understand malpractice risk and asset protection. Do not trust anyone who says you can “go bare” when it’s the wild west out there.
Why This Matters and What to Do Next
For physicians, the stakes go beyond financial loss. The emotional toll of a malpractice suit is well documented, showing that doctors facing litigation experience stress, anxiety, depression, and even burnout.
The idea of losing everything personally adds another layer of pressure.
Being proactive with asset protection doesn’t mean you’re certain you’ll be sued someday; it’s a way to preserve the life you’ve worked so hard to build. Don’t think of it like doubting your abilities or planning for failure.
When we drive a car, we buckle up not because we don’t trust ourselves, but because we know hitting the road involves risk. The same logic applies here.
Having an asset protection plan in place is a way to protect your family, your future, and your ability to keep practicing medicine without the constant shadow of financial ruin.
Coming back to the original question: can physicians keep their personal assets safe in malpractice suits? The answer is yes, with a light caveat: they need to have the right planning and understanding of the law.
The system is not perfect, and risks do exist. But for most doctors, personal bankruptcy or loss of home is avoidable. If you’ve spent a lifetime focused on caring for others, it’s only fair to care for yourself a bit too.
Talk to a lawyer who knows medical malpractice and asset protection inside and out. Review your insurance policies. Organize your finances so they work for you, not against you.
We accept the risk of medical error as part of the human condition; sometimes, despite our best efforts, things go wrong. If we’re willing to bear the weight of those outcomes professionally, why should the system allow total personal devastation?
As a society, maybe we need to rethink how “justice” balances accountability with reason, especially in a field where lives and livelihoods both hang in the balance.
Until then, it’s up to physicians to quietly and smartly protect themselves, because while medicine is about saving lives, sometimes it’s also about preserving your own.
Frequently Asked Questions
Q: Can a malpractice lawsuit force me to sell my home?
A: It depends on your state’s homestead exemption laws. In many states, your primary residence is protected from creditors up to a certain value, making it difficult for plaintiffs to force a sale.
Q: What if the malpractice award exceeds my insurance limits?
A: You could be personally liable for the difference, but protections like retirement account safeguards, trusts, and exemptions may limit what creditors can collect.
Q: Should I form a professional corporation or LLC?
A: Yes, these business structures help separate your personal assets from business liabilities, but they don’t protect against personal negligence claims.
Q: Can retirement accounts be garnished to pay malpractice judgments?
A: Generally speaking, qualified retirement accounts such as 401(k)s and IRAs have strong federal protections against creditors, including malpractice claimants.
Q: Is asset protection planning legal?
A: Absolutely, as long as it’s done proactively and not to defraud existing creditors or hide assets after a claim arises.
Image Credits: Tingey Injury Law Firm
2 thoughts on “Can Physicians Keep Personal Assets in Malpractice Suits?”
Tenants in common
I have to wonder how much the vague but ever-present possibility of a malpractice suit “wiping out” personal assets has contributed, cumulatively, to my level of stress, anxiety, and burnout over the years of my professional life.