You Just Won Your Medical Malpractice Lawsuit. Now What?

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By Daniel Scott Johnson, Windfall Advisors

Prevailing in a medical malpractice lawsuit is often a double-edged sword. On one hand, awards can easily be in the six figures. Just ask the Penn Medicine patient who won $19.7 million last year due to a doctor failing to diagnose her spinal cord lesion. 

On the other hand, to have filed such a case means that either you have suffered a debilitating injury at the hands of a trusted physician—or a loved one has experienced what the court has determined to be a “wrongful death.” This is definitely not the kind of lawsuit any anyone wants to ever have to pursue. 

As it turns out, awards in medical malpractice suits usually come in two parts. The first involves the actual medical expenses one must cover as a result of the alleged malpractice. These are call economic damages, and can include:

  • Hospital bills
  • Surgery costs
  • Rehabilitation and physical therapy expenses
  • Ambulance fees
  • Laboratory fees
  • Prescription medical costs
  • Lost income

The second type concern non-economic damages. These are usually of a personal nature, and therefore are more difficult to monetarily quantify. They  can include the following:

  • Pain and suffering
  • Emotional distress
  • Loss of companionship
  • Loss of enjoyment of life

In California, the 2022 legislation known as AB 35 increased the former $250,000 cap on non-economic damage awards to $350,000, a ceiling that rises each subsequent year by $40,000 until it reaches $750,000. If a “wrongful death” is involved—that is, someone’s passing caused by a wrongful act or neglect—that cap is now $500,000, increasing each year by $50,000 until it reaches $1 million.

Of course, as attorneys often argue, no amount of money is going to make physical suffering any more tolerable or bring a loved one back to life. And yet, money is the only relief the law permits. 

This begs a pertinent question: So now that you have won your award, how to make best use of it? Certainly, bills must be paid, and creditors satisfied. These funds usually come from the economic damage side of the award. As for non-economic damages, that answer may not be as straight-forward. If you have been awarded $100,000 or more for pain and suffering, etc., you need to consider the following:

  • Your long-term earning prospects. If you have been awarded a large payment as the result of a medical malpractice suit, it probably means you are in some sense disabled and/or are suffering from chronic pain. If this is indeed the case, your ability to earn a steady income of any significance may be impaired, perhaps permanently. Creating a steady, dependable income stream therefore must be your top priority. An experienced financial advisor can help make sure you chose the right investments for this goal.
  • Emotional Conflict. Litigation, by its nature, tends to heighten emotions, bringing out the worst in the individuals involved. Once an award is made, keeping those feelings out of your decision-making can be a real struggle. This is why having a stolid financial advisor already in place is critical in such situations.
  • The Award Structure. How an award is structured can also have a significant impact on the benefits you actually receive. If possible, retain your financial advisor before an award is granted to ensure it is structured to your maximum benefit.
  • Tax Implications. Most medical malpractice awards are not taxable. (They tend to qualify as personal injury awards.) However, awards from lawsuits that do not fall under the medical malpractice/personal injury umbrella usually are taxable under Form 1099-MISC. Even so, there often are ways to structure these awards to minimize one’s total tax exposure. Again, a financial advisor can best assist in this regard.
  • Liquidity and longevity. Proper financial planning can help ensure you always have the money you need—when you need it, and that you don’t outspend and/or outlive your proceeds. Formulating a sound investment plan with the right strategy, structure and professional investment management is critical for your assets protection and growth to sustain your financial goals.


Bottom line: If you have been the beneficiary of sudden wealth as the result of a malpractice lawsuit award or settlement, please plan ahead. As noted above, how an award is structured can determine how much you actually net. It is always best to have your financial advisor work in tandem with your attorney(s) before your case is settled or adjudicated to determine an award structure maximizing how much money, in fact, ends up in your pocket.

If you’re in litigation as the result of medical malpractice, including wrongful death, take the important first step by contacting me today. You will be in good hands with an expert who has been quoted in articles written for, Forbes, and other leading news and financial media. And while a solid financial plan cannot eliminate the damage you have suffered, it can certainly relieve further psychological trauma by laying the foundation for a safe and secure financial future.

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