ALL MALPRACTICE POLICIES ARE NOT CREATED EQUAL. HERE'S WHAT TO LOOK FOR WHEN SHOPPING FOR COVERAGE.
One of the key elements of any healthcare provider’s risk management plan is securing professional liability (also known as “medical malpractice”) insurance coverage. But, all professional liability policies are not created equal. When considering which policy to purchase, physicians and other healthcare providers should thoroughly examine and understand who the policy covers, how coverage is triggered, and the types of patient claims that are eligible for coverage. The goal is to maximize protection from the potentially devastating costs of successfully defending malpractice claims. There are a number of key questions that may assist healthcare providers in seeking and reviewing policies. Let’s take a look at a few:
How should I identify and evaluate the insurer?
Professional liability policies are issued by a wide range of entities—physician-directed companies, commercial carriers, joint underwriting associations (JUAs), risk-retention groups, and trusts. Older companies are more easily evaluated, while newer ones have less of a track record. The risk profile of each types of issuer differs somewhat. Healthcare providers may want to ask colleagues, check with their state or local medical society or their state insurance departments, or contact the Physician Insurers Association of America (PIAA) for guidance on which insurers offer medical malpractice policies. Premium amounts are certainly an important consideration, but should not be the primary reason for selecting a company or policy. When evaluating a particular insurer, the healthcare provider should evaluate the financial stability of the company (check the company’s A.M. Best rating) and its performance record (on record at state insurance departments). Healthcare providers should also ask the following questions:
· How long has the company been writing medical malpractice insurance?
· How many physicians does the company insure?
· Assuming that the coverage is on a claims-made basis, what are the rate projections for the next few years?
· Will the insured be protected by the state guaranty fund?
· Is there a possibility of assessments against insureds?
· Is an up-front capital contribution required?
· What loss control assistance is available?
· Is the insurance program endorsed or sponsored by any medical association?
What type of policy do I need?
There are three general categories of policies—occurrence, claims paid, and claims made.
Occurrence policies cover the policyholder if the policy was in effect on the date of the act or omission that triggers the patient claim—similar to automobile insurance. This coverage is often very difficult to obtain.
Claims paid policies cover the policyholder if the claim is paid while the policy is in force. We do not recommend claims paid policies because if, for any reason, you lose coverage during the course of defending a claim, you may be left to cover the amount of any judgment or settlement and related costs and expenses.
Claims made policies are the most common. This type of policy covers the policyholder if the claim is “presented” to the company while the policy is in place—this means that, even if the act or omission that triggered the patient claim happened prior to the execution of the policy, if the patient brings a claim against you while the policy is in place, you are eligible for coverage.
What are nose and tail coverage? Do I need this coverage?
The key for healthcare providers is to eliminate any gaps in coverage. In a claims made policy, there is often the option of supplemental “nose” coverage. The healthcare provider should make sure that the retroactive date of this coverage covers all prior acts for which the healthcare provider does not already have coverage. For healthcare providers who are retiring, leaving another insurer, or leaving their employer, they may also want to consider purchasing “tail” coverage, which covers subsequent acts. This coverage can be perpetual or can last a limited number of years. You may want to check your state’s statute of limitations to determine how long you need the tail to last. You may also consider a death, disability and retirement (DDR) tail. In some jurisdictions, this coverage is no-cost.
Who does the policy cover?
The treatment of the policyholder (and, if applicable, employees of the policyholder) under the policy depends on how the policy defines the “insured”. These terms are defined in the policy form, and often listed on the policy declarations page. If you are a solo practitioner, this is relatively simple—you will be the named insured. If you are a larger healthcare provider (or employed by one), the “insured” entity(ies) should be examined in more detail. Each individual clinician needs a policy, but the corporate entity itself may also need coverage. The term clinician was chosen purposefully—the liability coverage isn’t necessarily restricted to physicians. The healthcare provider should also review whether support staff, including RNs, NPs, and PAs are covered by the policy.
What is excluded from coverage?
It is important to review coverage exclusions, which can limit the scope of a healthcare provider’s coverage. Some policies exclude certain types of claims involving punitive damages, intentional misconduct and contractual indemnity claims. Some policies exclude professional misconduct claims from state licensing boards. Some policies narrow coverage to acts or omissions by the clinician if he or she is not working within the scope of their employment. For instance, if a clinician is moonlighting outside of the facility by which he or she is employed, does coverage apply? A close review of the policy should reveal the answer.
How much coverage does the policy provide in dollar amounts?
The declarations page of any policy will also state the “coverage limits” for the policy term—generally there are two numbers: (1) the limits for any single claim, and (2) the aggregate limit for all claims. These coverage limits are the amount of insurance the policy affords the policyholder. In deciding the amount of coverage, a healthcare provider should check whether his or her state mandates that healthcare providers have a minimum amount of medical liability insurance coverage. If the healthcare provider has admitting privileges or is employed by another entity, that entity may also have its own coverage requirements. A healthcare provider should read the policy carefully to see whether the costs of defense of the claim are inside or outside of those limits. In addition, the healthcare provider should examine terms regarding any applicable deductibles and supplementary payments (e.g., interest, attorney fee awards, appeal costs).
Is there a “consent to settle” clause?
As any healthcare provider knows, when a patient files a claim, there is more at stake than just the potential economic consequences of defending the claim. The healthcare provider’s reputation and ability to continue to practice his or her profession is on the line. Every law suit is on public record. In addition, there are mandatory reporting requirements to state agencies and the federal National Practitioner Database (NPDB). A healthcare provider may have an interest in fighting a claim, even where the insurance company would rather settle it for financial reasons. However, not all insurance policies will offer a policyholder the right to withhold consent to settlement. And some policies have additional arbitration or peer review requirements. Some policies allow the policyholder control over the decision to settle, but include a “hammer clause”, which states that if the insurer recommends settlement, but the healthcare provider wishes to go to trial, if the trial court awards more than the projected costs of settlement, the physician is responsible for paying some or all of the difference. Healthcare providers should review the terms of the policy to determine whether they are comfortable with the amount of authority they retain when it comes to claims settlements.
Before signing on the dotted, line, healthcare providers should ask multiple carriers for a copy of the insurance policy that the company would issue and review it carefully. It is important to evaluate both the insurance company and the insurance policy. In addition, after selecting a policy, it is important for healthcare providers to understand their obligations under the policy. We will address these obligations in a separate post. Once a claim is filed against you, it is too late to choose the right partner. We recommend working with your insurance broker or attorney to mitigate and minimize the professional and financial impact of potential patient claims to the maximum extent possible.