Episode 43: Talking To An Asset Protection Attorney About Wealth Preservation w. Ike Devji

This week my guest is Ike Devji. Ike is a doctor of jurisprudence and is here to discuss asset protection. Ike has been doing wealth preservation strategies for the last 17 years and has protected over $5 billion in personal assets for thousands of position clients all over America. In this episode, Ike shares tips for how to protect yourself as young investing physicians. He will share details that many miss when it comes to topics like medical malpractice.

Ike Devji (02:16)
Sure. I’d be happy to and I, and I think your opening point is a good one. It is important that your viewers understand the playing field and we are in a litigious society. The United States has up to 70,000 lawsuits filed a day. As a former litigator, I will tell you with a little bit of shame that not all of those have merit. Many of them are fishing expeditions, many of them are soft extortion attempts. And we’re going to talk about some of those when we talk about some specific risks. But yes, the first solution for many people on any controversy or the slightest discomfort or inconvenience is litigation. And in many cases that does not have merit. And in many cases that litigation is churned by attorneys themselves. You’ll notice that you see a ton of advertising for medic, for medical malpractice and personal injury attorneys. And you see almost none from people like me.

Justin (03:16)
That is true. I’m, I live in Philadelphia, which I’ve heard anecdotally is one of the most litigious cities in America. I don’t know if that’s true or not, but driving around the freeways here, up and down 95 and 76, there’s all these huge billboards. Sometimes it’s like a series of four billboards where it has like one part of a phrase and then a second part of a phrase and then a third part of a phrase. And then the fourth billboard is the picture of the medical malpractice attorney or the, you know, personal injury lawyer or whatever. So that’s absolutely the way it seems from where I’m sitting.

Ike Devji (03:44)
And in that understanding that playing field, the onus is on successful people, including physicians to take some basic steps to protect themselves. So just as we lock our doors, we don’t let people have our pin numbers. We, you know, we take all of these basic steps. You have to take the same kind of steps to proactively protect your success in this country at this point.

Justin (04:13)
Absolutely. So talk about some of the factors. You know, anybody who’s listening to this podcast probably is already in this category of people who need to be particularly vigilant about protecting their own assets and wellbeing. But you know, you, you sent me this list of special things to consider. Can you talk through some of the important ones for our audience?

Ike Devji (04:30)
You bet. Obviously, since you are speaking primarily to a physician audience, we know that medical malpractice is a real significant and valid concern. Absolutely don’t mean to underplay that in any way in our discussion, but I think it’s just as important now that we’ve acknowledged the sort of the elephant in the room. Yeah, we get it. Doctors get sued and they get sued because when they make a mistake, it can be serious life threatening or life ending and frankly, because they are considered to be deep pocketed, collectible defendants. Attorneys don’t waste time suing people who don’t have any money or who have money that we can’t get. Right. This is a business. Litigation is a business, so acknowledging medical malpractice, great. We understand that it’s a risk, but one of the things that physicians don’t do is they don’t look at themselves as holistically as they look at their patients or as they advise their patients to treat themselves.

Ike Devji (05:34)
So physicians have many other risk factors that can be more common, more often recurring and financially as devastating as a medical malpractice claim. So when I start going over basic risk factors like do you own a home or a car? Almost everybody listening to T a is going to have one or both of those and the exposure comes with that. Do you have children’s spouses and other family members in control or having use of those things that could create liability for you? Do you own a business? So yes, you own a Metta, you might be a medical practice owner, but you also have all of the other business and regulatory exposure that is common to every other business in the United States, including the next Rick’s risk factor, which might be something as simple as are you an employer? Many of, many of the physicians we deal with are more likely and more routinely face employment law claims than medical malpractice claims.

Ike Devji (06:33)
So the average American business owner is five times more likely to be sued by an employee than for any other reason. And the average sexual harassment verdict has half a million dollars. So meat too has very definitely come to medicine and frankly medic, many medical practices don’t maintain a lot of the same formality and standards of conduct and communication that we see in the corporate world. Right? It’s a little more fast and loose with the jokes we might tell or the things we might say and that’s going to have to change in order for medical practice owners to protect themselves. There are other other risk factors. For instance, many physicians are recruited to serve on corporate boards, right? Because MDs bring a legitimacy and an aura of authority to a variety of things, whether it is medically related or not. And it could be your church or your synagogue or your university or your kid’s private school or any of those things. All of those carry liability as well. So there are many other risk factors that we go over and try and address proactively that have to be treated as seriously as med mal risk itself.

Justin (07:48)
Yeah, makes sense. And that’s, I mean, that’s incredible. There’s a lot of things that even I didn’t really think of, but that’s, that sounds absolutely right. So if we take an example of a practice owning physician who is a, you know, a partner in a practice or an anesthesia or pain practice let’s kind of walk through some of the angles that you’re going to be looking at their life, not only from the medical malpractice side of things, but to come up with a comprehensive protection plan. Understanding that, you know, there’s no rules of thumb probably cause they’re, you can’t paint with a broad brush and things like the law button give us some categories that we want to address if we’re looking at a, a wealth preservation plan. [inaudible]

Ike Devji (08:26)
You bet. So first we start with the individual and their personal assets and their family and we look at what assets they have that could be exposed to both their personal and professional risk. And that would include for most people, primarily their real estate holdings, which would be the home they live in. Any investment real estate, including the building. They may operate a practice out of and rental homes, apartment buildings, things like that. I worked with a bunch of anesthesiologists and pain management docs all over the country and I have some very high performing financially successful ones in my own immediate family. And what we are consistently seeing is that many of these docs are taking the wealth that they’re generating in their practice and then reinvesting that in either areas that are outside the practice or are in areas that they are comfortable and familiar with.

Ike Devji (09:25)
So for instance, there are a couple of couple of basic investments that every doctor loves to put his money in or her money in. And the two most common ones are surgical centers, ASC, ambulatory surgical centers and imaging centers. Everybody loves both of those because you get the business model and you know, they’re, they’re comfortable with. We also see many physicians very heavily investing in real estate. So we look at all of these non nonqualified assets that aren’t protected by statute. We look at how they are held. Have they been legally segregated from the doctor as a person? Have they been legally segregated from the medical practice as a risk generating golden goose, right? That the thing that is the source of your wealth can also take your wealth away. And then we look at their non-taxable savings and investments, the kinds of things that you might be managing for them and look at how those are being held.

Ike Devji (10:24)
And in most cases, what we see is that those are being held either in their own name or in the name of a revocable living. Trust is an estate planning vehicle, which many physicians are surprised to learn, provide zero credit or protection during their lifetime. Revokable living trust is a phenomenal tool. I have one. I want you to have one. I want everyone listening to have one who has a family and a need for an estate plan. We do them for people everyday, but we tell them it will not protect you from your assets, from your liabilities during your life. So we look at those issues. We also look at the family structure. We look at how many cars they have, we look at do they have a seven figure personal liability umbrella policy. This stupid simple thing of having an umbrella policy is a big gap that I don’t understand why so many physicians continue to walk around with that exposure.

Ike Devji (11:22)
It is our advice to every client that we service that they have a minimum $2 million personal liability umbrella over their home in their cars. We also tell them that the only thing that you should expect that protect to protect you from is a car accident or somebody getting injured at your home. So it’s important to have the coverage. It’s also important to know where the limits are and then we look at the practice itself and do risk management there. For instance, if you’re an employer, do you have a custom drafted state specific employment manual or do you not have one at all? Or do you have one that you cobbled together and got free from your buddy in another state, crossed out his specialty and wrote your name? Ma’am, many physicians do it that way. We look at the insurance coverage that a physician might have. Not just the MedMal coverage but the specialty insurance coverage. Are they covered if they get audited, are they covered? If they get sued by an employee, are they covered? If they have a data breach those things need to be specifically addressed. And what most docs know is that I’m insured, but they don’t know the details and the details matter a lot.

Justin (12:30)
Indeed. So there, there was a, that was a real treasure trove. I want to zoom in on a couple of the things that you just shared. Let’s, let’s talk for a second about the, the surgery center buy in. So if somebody owns a share of a surgery center, which you know, in the pain management space is not uncommon, how should a physician be thinking about, you know, titling for that share of ownership? Does it make sense to, I mean, is it ever appropriate to have a share of ownership in their personal name? Do they need to have an entity set up for that? And how does it vary based on how much they make or how much it’s worth? And I understand, again, this maybe is difficult to speak in specifics cause it might be state specific, but can you give us a little bit insight then?

Ike Devji (13:10)
It’s not really state specific, but it is fact specific. So all of the things that you mentioned are important points, right? How much money is in there, when do they own it, what is their role? And so we ask those questions as well and I’ll unpack a little bit of that for you. But the answer to one of your first questions is, yeah, absolutely. There should be an entity set up and this should be the solution here is common. Whether we are talking about an interest in an ASC or whether we are talking about a rental home that you have, right? And so there are a couple of things we want to do. Number one, we want you to own your share of for instance the ASC through an entity, an LLC, a limited partnership, something like that that can safely receive the income distributions that are, that you are hoping to get even if you are facing some other adverse challenge, right?

Ike Devji (14:09)
Because if I’m suing you for med mal and I get a judgment against you, not only can I take the assets you have, I can take the assets and receivables you are expecting up to the limit of my judgment. So while I can’t take your interest in the ASC itself or the assets of the ASC, if I am suing you and the claim is not related to that investment, when the checks come back to you, we can grab those unless those interests are owned by another entity. Same thing is true with rental houses. So many doctors will go out, get some rental or investment properties, set up a series of LLCs, but they are the member or owner, each of the LLCs, which means the income distributions go to them directly, which means the bad guys can get them.

Justin (14:59)
Got it. So if we take a, an example of a physician owning a share in their own name of a surgery center, they’re sued, there’s a judgment against them and it exceeds their ability to pay the money coming from the ASC to them on an ongoing basis is going to be subject to that judgment if they own the ASC in an entity that it sounds like there’s an arms length relationship. Maybe describe like how should this entity be constructed so that it may preserve that income from the ASC and it might not be subject to seizure in that judgment.

Ike Devji (15:32)
Sure. Well, you know, remember that in this case the ASC is not owned by the physician but is owned by another entity that the physician might write. So the payments are not made to dr G they’re made to his family entity directly. That entity is not a party to the lawsuit and therefore that provides some protection, right? Because we’re not going to let the entity that owns the ASC share and the two rental LLCs and the investment in your brother-in-law’s fast food franchise, whatever it else it is, we’re not going to let that engage in anything dangerous that would cause it to be directly in harm’s way. So those payments can continue to come in. They continue, they can be accumulated, they can be reinvested. And that entity in many cases that we would use is either an LLC or in most cases a limited partnership with what some of your viewers may have heard referred to as generally as a family limited partnership. And any prefix that you hear in front of limited partnership is something a lawyer has put on there to try and indicate its use. I call mine asset management limited partnerships because that is the business purpose. So we set these partnerships up to hold non-qualified savings and investment accounts like you would create and manage. We hold, we set them up to also hold interests and things like AACS or LLCs that might own rental property.

Justin (17:06)
Got it. So investment in a business like this, whether it’s a surgery center or any other, you know, imaging or, or whatever the fast food example, it seems like pretty quickly there’s a, there’s a need or at least if somebody consulted with you on this, you would say we need to start to build legal infrastructure, entity infrastructure to be able to protect you appropriately. If somebody is going from zero, which is, I’m a doctor who makes a lot of money, I just finished fellowship and now I’m making half a million bucks a year and I’m thinking about these investments and I have a will but I haven’t updated it since my first year of residency. Right when I got married and I’m trying to lay the groundwork. Can you describe maybe that first round of creating the legal infrastructure for them to function in a, in a way that’s going to protect them, might look like?

Ike Devji (17:59)
Absolutely. and unfortunately it’s not very sexy or exotic. It’s some really basic stuff. Some, some of them, some of the things that we look at are the things that we’re going to send them to somebody like you to address. So when we have somebody who is out of that school or debt phase and is now into an accumulation phase where they’re, they’ve got their first, you know, few hundred thousand dollars saved that they can invest. In some cases it’s as little as 50 or a hundred where somebody says a senior member of their practice or a parent who’s a physician or somebody who’s just informed financially and legally says, Hey, you need to go see somebody about this. There’s some basics that we start with. And some of those, as I said, are, are not very exotic or sexy. So number one, I would ask that person first to make sure that they have appropriate disability coverage.

Ike Devji (18:50)
You know, because that is a young physician’s greatest asset is their future ability to earn for the next 30 years. We would then look at do they have an UpToDate estate plan so that whatever, whatever fruits of their labors have been accumulated past to their family or whoever they’re leaving behind in the way that they want it. In some cases we’ll ask questions about that person and their preexisting debt. For instance, did your parents co-sign on your medical school debt? And if they did, do you at least have half a million or $1 million in term coverage? You’re this young, you know, swinging single doctor who doesn’t feel the need for life insurance because you are a single individual. Great. Are there people who have co-signed debt that you need to protect? That way we then make sure that they have a personal liability umbrella policy in place so that we’re crossing those eyes and dotting their teas and then if they have some critical mass of cash accumulation that they plan to invest, whether it is actively invested with an ASC or in real estate or if it’s handed to you to manage, we want those accounts to be typically wrapped in a limited partnership.

Ike Devji (20:07)
And that would be the baseline tool that we create. Now, you know, there, there are different ways to do this. Planning. Other planners may do it differently, but this has, based on the 17 years that I’ve been doing this one thing, this is a great platform to start people on. And once the money is in that limited partnership, they have full discretion to invest it any way they, like I said, so they can give it to a financial advisor, they can allocate some of it to an LLC that might be created by the partnership to own a share of an ASC or an imaging center. They still have all the same options, but in that case, they are investing through that entity and not as dr target.

Justin (20:52)
Got it. Okay. So if somebody says, Hey, this sounds like a great idea, maybe either how do I take the first step and how much does it cost? What is the process like? Or perhaps, Oh, you already bought into a surgery center, or I have these ownership stakes and they’re already owned in my name. How do I, is there a way to retroactively you know, move ownership around in a way that’s going to be you know, appropriate?

Ike Devji (21:16)
Absolutely. And we do that all the time. Many of the folks that come in to see someone like myself already have some moving pieces, right? We don’t, we rarely get to start with somebody at ground zero on. We do have some, some young physicians that come in that way, but most of the folks who walk in my door at least, and I know other planners who do what I do. Most of these folks, folks have some, some of these moving pieces in play and we do sort of gather and reorganize them and show them what can be done and how making a change from, Hey, let’s not have this in your name. Let’s put it over here. And this is the result of how the distribution will made will be made. It’s not going to change your text. That is, it’s not going to do any of these other things that you’re worried about, but it will make it safer and more productive and more predictable.

Ike Devji (22:08)
So yes, we absolutely can and should make those changes. The one challenge that we often face, and this is interesting with with medical practices, is that medical practices often acquire real estate. So may perhaps they’re a group of physicians that own a practice and then they decide to buy a building. So when it comes to their share of the building, I go back to my client and I say, I would like your share of the building or your share of the LLC, your membership interest in the LLC that owns the building to be held by one of these entities. And in many cases the operating agreement that’s in place doesn’t account for the fact that each of the members of the LLC are high risk individuals that should be able to hold that interest away from themselves. As you said, at arms length.

Ike Devji (23:01)
And that is a restriction we often run into with physicians. And the reason those restrictions are, they’re pretty simple. You don’t want one of your partners giving or selling their share away and putting you in business with a stranger. We get that. But that shouldn’t preclude you from being able to make a transfer to your own advanced estate planning and wealth preservation or asset protection plan. So that’s the one thing we run into often, but when we explain it to the group, in many cases we’re able to get around it as well. But those who are going into that should think about that on the front end. And so they’re not surprised about it once they’ve already written their a hundred thousand dollars per check in their hand.

Justin (23:42)
Right. So as far as setting up that limited on the front end, what does that process look like? Is that usually done in conjunction with an estate planning process or is it like a, you know, a separate sort of business focus to, to that, you know, that series of events and how are you looking at the big picture as it relates to a client’s circumstances?

Ike Devji (24:01)
Sure. If they have an estate plan in place, then the partnership and the other entities that we might create will point at it. And it will say at the end of your life, the estate plan, the dr G revokable living trust will have title and control over these assets and we’ll distribute them the way that you want. If they don’t have an estate plan, we certainly recommend that they implement one at the same time. And frankly, while asset protection planning is legitimate, ethical and legal on its own, it is even more defensible. Every strategy is more defensible when we have more than one articulable legitimate business purpose for doing it. So why did you dr G go to this attorney and do all of these things on this date? Well, I didn’t have an estate plan. I have some wealth that’s coming in. I’m investing that well if in three or four different things, I need all of that tied together for both protection and for estate planning purposes and then it makes even more sense.

Ike Devji (25:09)
Would it make sense to do it on its own? Absolutely. But as I said, from a tactical perspective, it’s great if we can integrate these things and sometimes that’s the fact pattern and sometimes it isn’t. And when we set the partnership up, we look at the need for the partnership based on the assets the person has and we want to see some critical mass of money that makes it worth spending. The cost of the partnership. The partnerships also are drafted in a way that is very specific. So every limited partnership or family limited partnership produced by every law firm in the United States is not the same. They’re not built for the same purposes. And so those that are being used for this purpose need to be drafted carefully by somebody who understands distribution provisions, who the general partners should be. What partner, what powers general partners, which are the managing partners versus limited partners should have. So there’s some detail that goes into that. You know, saying limited partnership is a lot like saying surgery, right? Kind of very broad term. And so we need to be sure that the person implementing that tool has the requisite skill and experience. Once it’s set up, then we can be very flexible with how it’s used and how, how it’s wealth is invested. Does that answer?

Justin (26:34)
I think so. So at what levels of income or wealth or whatever, you know, if I’m buying into whatever it is, you said, you know, there’s a critical mass. If I’m a newer physician, how do I know if I have critical mass to, to start using some of these instruments?

Ike Devji (26:47)
That’s a really subjective question, right? Everybody who I’m asking here. So there’s some biases disclosed. There are times where we talk to somebody who’s worth North of $10 million, who doesn’t think that spending 20 or $30,000 to protect that, that they’ve worked their whole life for is worth it. Doesn’t that make you want to pull your hair out? It does. It does. Because when you, I often talk to people who have spent more time buying a watch or planning a vacation, more time and money than they have protecting the last 50 years of their life’s work. So I can’t fix that. You can’t fix that. It is what it is. So the, I guess your question is, I think a common question, which is when, when should I start or when do I have enough? And as I said, that’s a very subjective thing. We routinely work with people who have seven to nine figure net worths and I say the smartest clients I have start when they have their first 50 to $100,000 saved.

Ike Devji (27:53)
I hate to throw fees out because they vary from market to market, but look, if it would would a one time, $5,000 investment in a holding structure that can help protect your assets, give you a place within which to put what you’ve saved, give you a place within which to continue to accumulate the wealth that you earn and from which to safely reinvest that at what point is spending $5,000 worth of tea? Is it when you have your first 50, is that when you have your first 100 and when you think about that in relation to the annual cost to ensure the annual recurring cost to ensure a $40,000 car? Yeah. I think the value proposition of making this investment one time on the front end to buy a safe that can be with you for the rest of your life is pretty clear. Yup. But I’m the guy selling it. Yeah. Right, right. This is what I do for a living. All right. So that decision needs to be made by each individual. When do you think that you have enough that losing it would make you set? Yeah, absolutely. And that the psychology of that is something that after 17 years, I still don’t understand.

Justin (29:20)
Yeah. I mean, I, I have my own as a financial planner, I’d have my own permutation of that same quandary, which is, you know, if you’re making four or 500 K a year, would it be worth four or five K to create an optimal situation? You know like it’s, it’s very difficult to envision a situation in which that fee wouldn’t be earned. Even if you discount the time that the plainer spends at zero, you know, the, the, the opportunity for that fee to be earned back in years one through five is again, I’m, I’m the guy selling it so I feel the same way. It’s, I’m biased, but I, I certainly understand,

Ike Devji (29:55)
Right, right. Every everybody’s going to bring their own baggage to the table as long as you disclose it upfront. Then when you’re 20 years old and you have an old car and you live in an apartment, you don’t worry as much about security and locking the doors and things like that. And then when you’re in your forties maybe, and you’ve got the big fancy house and the cars and the alarm system and the cameras and different levels of security are appropriate at different levels of net worth and income. And then there’s the subjective factor that, as I said, that often puzzles that even us. Yes.

Justin (30:26)
Yeah. A lot of this, you know, for a business owner, either a practice owner or somebody who has rental property or, or other real estate holdings or other businesses, there’s, there’s more complexity. Let’s talk for a minute about somebody who’s a more plain Jane vanilla. You know, before you and I hit record here, we were talking about Honamin here in in Philadelphia, the hospital that went under a few months ago and upward of a thousand physicians, resident physicians in this case where I don’t know if it was a whole thousand were all residents, but many physicians who are employed by Honamin are having issues now with their with their insurance coverage. So talk a little bit about that and the way that you’re viewing that through your lens.

Ike Devji (31:07)
Sure. And I think you’re, the, the situation that you’re referring to for your viewers that might be outside the geographic area and didn’t, were part of our conversation was a hospital went out of business, went bankrupt, and a thousand physicians were suddenly left without their medical malpractice coverage or the tail coverage. They expect it to be there. Now that is an aberrant and unusual situation. You and I both understand and agree on that, that that’s, that’s not a risk that everybody’s going to face every day. But in this case, it’s a big risk for a large number of people. But the idea that employed physicians, hospitalists w two physicians don’t face the same level of medical malpractice liability is incorrect, right? Litigation. And I’m a former litigator. So before, before I spent the last 17 years doing asset protection planning, I used to be the bad guy.

Ike Devji (32:07)
I have a number of friends that are medical malpractice and personal injury attorneys. In fact there were some in my building. Okay. And so we talk about business and we talk about lawsuits and we talk about claims and we talk about collectability. And the way litigation works is a shotgun, not a sniper rifle, right? So the first, the first round is everybody goes, everybody gets named and they try and get what they can from every named defendant. And in some cases they understand that some of those defendants are going to be able to get out of the, out of the chain, so to speak of liability, which physicians would refer to as the chain of care. Right? So everybody from the from the first doc that might’ve looked at somebody in the ER to the anesthesiologist and the radiologists that were involved further down the line, everybody goes in some of these cases and everybody should be protected.

Ike Devji (33:10)
Now, in most cases, there is significant heavy and credible insurance coverage available to these employees, but it is not infallible. There are cases where it goes over the limits and there are certainly cases where you need to be protected against that potential exposure and all of the other risks that we talked about before. Something bad happens, right? Because again, if there’s one thing that your viewers go away with today, the most single, most important thing they should go with is the understanding that this is time sensitive. And that’s a big problem that you and I have as planners, right? Where whether you’re talking to people about estate planning, disability and life insurance needs, or I’m talking about defensive strategies and defensive plannings. Most people don’t really want to spend a lot of time and money fixing a problem they don’t have yet, right? So asset protection works best as a system of legal and financial wellness and defensive planning before something bad happens.

Ike Devji (34:20)
As we say, you can’t ensure your life after you die. You can’t insure your car after the accident and you can’t protect your assets legally after you get sued. And I routinely, several times a month turn down people who were referred to me for help because they’re calling me after a claim. And anything that we should have done before the claim that would have been legal is now fraudulent or illegal. You know, so, so that’s a big part of, of the challenge that we face in the timing. And just because you’re an employed physician doesn’t mean you don’t have any of the other risk factors that we started our conversation, right. If you are that employed physician that is then reinvesting your wealth in a real estate deal or in an ASC that in itself has internal liability as well. If you own a home, if you own the car, if you’re on the board of the hospital or some other board, if you’re, you know, any of those other risk factors that we talked about still apply to you. So it can’t be, you can’t suffer from risk myopia.

Justin (35:24)
Right. So let’s take what you just described and maybe do a like a brief case study. So anesthesiologist and pain management docs are in most cases both involved in the procedure. Obviously anesthesia, administering anesthesia or pain management could be the procedure list. And so if somebody is taking the shotgun approach, they have a something in like a, you know, a spinal cord stim device implanted and they’re going after the pain doc they’re going after. If there was a radiologist who read some scans to help recommend a certain procedure they’re going to have to the hospital and maybe anybody else they can name, maybe just take us through that process. And if the threshold, like the amount for which they’re suing is approaching or above whatever the safety level is as far as the physician being protected, how does that, how does that play out?

Ike Devji (36:12)
Well, the attorneys, the plaintiff’s attorneys are looking for the path of least resistance, right? Remember that to get paid, they have to get a judgment when they have to Sue when get a judgment and then collect on the judgment pay all of the expenses that they have fronted, which can often be very significant in a medical malpractice trial if it goes that far. And then they need to make a dollar on the difference. So they are looking for soft targets where they can get a settlement or collect a judgment. So their sorting process really is as much based on collectability as anything else. And in many cases it’s going to be on who puts up the biggest fight. If we have an individual that is very well and professionally and aggressively represented and that representation makes a good clear showing that that person was either not at fault or that it will be difficult or impossible to prove based on completely objective evidentiary standards of medical evidence itself, then they’re going to move on to the softer targets.

Ike Devji (37:29)
And they’re, in many cases, what they want is a small settlement from everybody. In the chain. And other cases where there’s something catastrophic that’s happened, then they’re looking for a bigger number. And in those cases, those who are personally collectible are more vulnerable to that fear and that pressure, right. If you know that they can’t take your house and they can’t take the savings that you’ve worked diligently and you know, followed fire principles or whatever and followed these things and done all the right things, the smart things for the last 20 years and you know that those things are well protected and legally unlikely to be reached. That also changes your psyche and your, you’re footing for your defense, right, as to what you are willing to give them or what you are willing to do. And so being a well prepared, well trained, well armored defendant is an important part of that.

Ike Devji (38:38)
You know, which have, as I said, attorneys look at those, you know, wait a minute, this guy, we’ve heard this guy owns and interested in ASC, has a big house, works with some fancy financial advisor in Philadelphia, so on and so forth. We want to be able to proactively say, yes, there is a home, but it’s in an irrevocable trust. Yes, there are multiple real estate investments, but those are each in separate LLCs which are owned by a limited partnership which is owned by a trust. Yes, the client does have some earned income and that could be garnished depending on what state you’re in. You know, usually up to 25% well then that brings them back to what, what does this person have? Well, they’ve got to use cars. They’ve got a personal checking account with $32,000 in it and some use clothing and furniture and they’re actively earned income. Those are the only things that are available. Now, which of those, if you’re the plaintiff’s attorney, are you going to go after that person or the one who’s got everything in their own name more aggressively and which of those two defendants is more likely to write you a check to try and get out of this? All of those calculations are being made on the other side by the attorneys.

Justin (39:54)
Makes perfect sense. So an ounce of prevention is worth a pound of cure is what you’re telling me.

Ike Devji (39:59)
Absolutely, absolutely. I mean, the rule is be a hard target, you know, don’t, don’t look soft and inviting.

Justin (40:07)
Yeah. you mentioned before the idea of specialty insurance. So you know, for physicians they’re thinking about med mal is like the big 800 pound gorilla, but there’s, there’s a lot of other risks for them as higher nurses, high net worth individuals that they need to be aware of. And so talk a little bit about some of these, you know, you said like data and like cybersecurity audit employee lawsuit types of insurance is talk about how you viewed those, you know, protections in the, in the grand scheme,

Ike Devji (40:36)
You bet. Insurance is the vital first line of defense. So one thing we need to make clear to your viewers is that in many cases, physicians think, well, I’m going to do this asset protection stuff, whatever they saw, and then I’m going to either discontinue or reduce my medical malpractice coverage. And I tell them absolutely not. I don’t sell insurance, but I sure make people buy it and I make people buy it until it hurts. There are a few reasons for that. Number one, obviously the most obvious one is what if there’s a judgment right? And you hope that the coverage that you have in place is adequate to cover the judgment. Number two, what’s even more commonly overlooked is that even if you prevail, the costs of litigation and defense alone are routinely six figures. The average cost of, of getting out of a frivolous lawsuit in the United States that settles is still $91,000 in legal bills alone.

Ike Devji (41:41)
So I want my clients to all be heavily insured to catch the bullet on the legal fees as much as I want them to be insured to protect them against the judgment itself. Once we talk about, okay, let’s all genuinely agree that insurance is important, then what you have is very important. And this gets into the meat of your question. So yes, medical malpractice insurance at the standard one three limit or higher is of course a necessity. Beyond that for practice owners, there are multiple areas of specific business liability insurance that are not adequately covered in your base medical malpractice policy and you, you, you listed a few of those. So we talked about employment lawsuit liability earlier. So one of the areas of coverage that I make, every single client that has employees examined is called E P L I insurance or employment practices liability insurance and that helps protect you against employment law related claims.

Ike Devji (42:42)
Everything from classification risk to a sexual harassment claim can be covered in with a well drafted EPL policy. We talk about RAC audit insurance, which is for payer audits or Medicare and Medicaid, right. And many pain docs and anesthesiologists work with patients who because of their age and demographics are using those payment systems for their healthcare. We talk about data breach and cyber liability insurance, you know, data breaches and hacking is international organized crime and they heavily target medical offices that not only have the HIPAA information, which has statutory liability for the medical practice, which is very significant. But they also have lots of patient identifying information like social security numbers, birth dates, credit card numbers, things like that. Payment systems. In some cases those risks are external. In most cases they’re external. But there are also many cases where those risks are internal due to fraud, theft and embezzlement by practice employees.

Ike Devji (43:51)
Here in Arizona we had a case where a medical practice employee was using patient credit card members to go shopping and do various things online. And when she was discovered that practice had to inform 40,000 patients in their file. They may have been exposed, they had to send each of those people a letter and they had to offer each of those people credit monitoring for a year. So that is a potential $450,000 exposure just on costs without anybody even making a claim. Okay. So and there, there are a few areas of specialty insurance as well. One is, the other one is DNO, insurance directors and officers insurance. So if you are an employed physician or if you are a partner or owner of a practice and you not only are the doctor but also have some other title, VP, treasurer, CFO, something like that, you have some non-related or additional executive exposure that should be covered by directors and officers insurance.

Ike Devji (44:59)
Now the problem with this is in many cases when I give my laundry list of insurance coverage to a client, they go back to their insurance agent who has sold them the med mal policy in many cases and they will say, Hey, my attorney said I have to have this list. And I come and I come back and very proudly report that we have all of that and I’ll say, great, did you ask about the limits? And what we find in many cases, and again this is where the devil is in the detail, is that what they have is a $50,000 writer or less on their base med medical malpractice policy that says, yes, you’ve got 1,000,003 million for med mal and if you have a data breach we’ll give you 50 and if you have an IEP, an employment lawsuit, we’ll spend 50 and if so, I will tell you that if you get sued by an employee, $50,000 ain’t even going to cover the defense costs, let alone a judgment in most cases, right?

Ike Devji (45:59)
So it’s important that you have full coverage, that you have high limits. In most cases. I want to see $1 million worth of coverage on each of those areas that I just listed. And it is surprisingly affordable to do that for most small practices. I don’t want to quote insurance rates when we’re talking to a wide universe of people with very different practices and histories because all insurance is based on underwriting. But I’ll give you an example. I just went through this with a small cardiology practice, ask them to add all of that coverage and to get all four or five areas of coverage at the million dollar limit with separate limits, not with shit. And this is another detail are the limits that you’re talking about shared. So if, if you do have half a million dollars worth of data breach coverage, does it eat up a half a million dollars of your med mal coverage?

Ike Devji (46:55)
Right. Is it a shared limit policy? But we went through this with a cardiology practice. I asked them to get four or five areas of specialty insurance in place up to the million dollars and the additional annual premium was about $13,000 a year. And I think the doctor who owned the practice just about had a heart attack when he heard that number. And I said, look, buy it. Don’t buy it. I don’t sell it. I am telling you as your attorney that these are the things that I want out in front of you. If something bad happens, I also informed him that, look, if you do have an exposure within any one of these areas, like an employee makes a claim against you, the day I take you to the employment attorney’s office and you have to retain that person to defend you, you will write that person a $15,000 check. Yeah. As doesn’t even cover your container right now for that same 15 grand, you could have had $5 million worth of coverage, $1 million each in five different areas. Where are we penny wise and pound foolish and not getting that coverage in my opinion as someone who, as I said is, is objective and agnostic in that because I don’t participate financially, I think that’s an investment worth making. [inaudible]

Justin (48:12)
Absolutely. are there any so man, there’s, I really thank you for your time. You’ve been just a wealth of information here. Are there any other angles at which we want to look at? Maybe either specialty specific considerations or things that are newer? I’m thinking specifically about like things on social media or things that, where information travels much more quickly. Now than it ever did before? Are there new types of liabilities that physicians should be aware of and be able to protect themselves against?

Ike Devji (48:44)
There are a number of liabilities. And then fortunately as a protection, like medicine is a continually evolving science. So for instance, for my clients that own a medical facility that’s open to the public, we have a greater concern about security, physical security, including doing things like buying active shooter insurance than ever before. I’ve written a number of articles on this topic for my column and physicians practice. As you’re aware, I contribute to a bunch of different medical journals. But in physician’s practice I’ve had a column for about nine years. And I have very extensively and in great detail covered the need for increased physical security measures, including active insurance of medical practices. And we’ve seen acts of violence of medical practices all over the country. In some cases those are internal, like a, like a domestic violence thing that comes to the office.

Ike Devji (49:42)
And in some cases it’s something that happens outside that you unfortunately get involved in. So that is one newer risk that physicians have never traditionally had to worry about. That is now a big deal. Obviously privacy data breach risks are big. Social media, defamation, liability. What are you saying online as we are now all consistently, continuously nonstop connected to social media. You know, when you’re on Twitter and Facebook and everything in between what are you saying? What are your employees saying? What are your children saying? That is an area of that we’ve addressed and that I’ve written on extensively as well. It’s important that physicians have social media policies as part of their employment manuals and that they control that risk as well by having well-defined limits on what employees can and should say and do in any kind of capacity that could be linked to their employment.

Ike Devji (50:52)
And then of course we’ve seen what happens when doctors and other influential high profile people do things privately that can adversely affect their career and their reputation. We all remember the dentists that killed Cecil the lion a few years ago. I don’t know if you remember that story. Yes, I went hunting and killed the lion and that person had their practice shut down and got death threats from all over the world and he lost his practice. His employees lost their jobs. Imagine if that was your business partner and that could be an animal abuse issue. It could be saying something stupid and racist on Facebook and these things now spill over. So the idea that you have a private persona is increasingly less true. Everything you do is watched and traced and as a professional that is considered to know better. By virtue of your education and success, you will be held to a higher standard.

Ike Devji (52:01)
And it is newsworthy if something happens to a doctor and less newsworthy if something happens to, you know, a blue collar person. Right? Have you ever seen a headline that says Gardner arrested for DUI, so on and so forth where they lead with that person’s profession? It’s very rare, but when a physician makes a mistake, it’s going to be on TV or in the news. So the first layer of asset protection is always going to be the same. You and I have talked about this. It’s clean living. Let’s not do stupid things and get a suit in the first place. That’s the first line of defense.

Justin (52:37)
Yup. Perfect. Well, I think I want to end on that note like very, thank you very much for your time. It’s been a pleasure speaking with you. There’s so many, there’s so many more topics we could delve deeply into and perhaps would be to join you again and reprise it sometime in the future, but like devotee, thank you very much for joining us on the anesthesia success podcast. Thank you for having me. It’s good to be with you. If you liked what you heard this week, head on over to anesthesia, success.com where you can find more content and free resources to help you build a successful career in anesthesiology and pain management. If you want to leave a review in iTunes, I would also really appreciate it. Thanks for using some of your valuable time to join me today on the anesthesia success podcast.