By Christian Chivaroli, JD
Being a physician can be a dangerous occupation. While perhaps not as dangerous to life and limb as a lumberjack or great white shark nursemaid, it seems being a healthcare provider can be equally hazardous to one’s accumulated wealth and sanity.
The average provider can count on receiving less reimbursement for services than the year previous. The average provider can also count on an increased likelihood of being sued for some sort of malpractice and, of those providers, defense costs and settlements/verdicts will also be more expensive than in previous years.
Without proper insurance coverage, a single claim can destroy a practice and base of wealth that has taken a lifetime to build.
In this article, I will describe what a malpractice policy should look like and identify potential coverage pitfalls to avoid. Like anything important, however, I certainly recommend consulting with a professional to assess your individual practice, exposures and financial situation.
The Policy Form & Potential Coverage Pitfalls
Insuring Agreement – Claims Made and Reported & “Tail” Coverage
The typical medical malpractice insurance policy is written to cover claims-made and reported to the insurance company during the policy period.
If the claim is not reported before the expiration date of the policy there will be no coverage. If a claims-made policy is purchased, it is incumbent on the insured to confirm the “retroactive date” is appropriate to avoid gaps in coverage. If coverage is cancelled, an extended reporting period or “tail” policy should be considered to allow for future reporting of claims following the expiration of the policy.
In certain circumstances the insured can avoid the need to worry about retro-active dates and “tail” coverage by purchasing an occurrence-based policy. Similar to your homeowner’s policy, claims under an occurrence form can be reported and covered by the policy so long as the event occurred during the policy period.
These policies, however, are not universally offered by all insurance carriers and they tend to be more expensive than similar claims-made polices.
Exposures Not Covered by Malpractice Insurance Policies
Like any insurance policy, certain exposures to loss are not intended to be covered by a malpractice policy. For example, a claim for a “slip-and-fall” in your medical office may not be covered by a malpractice policy.
Other exposures not traditionally covered by a malpractice policy include: workers compensation, cyber liability, employment practices and CMS billing liability. The scope and breadth of these limitations vary from policy to policy but the moral of the story is: don’t assume it is covered, check with your agent or broker.
Definition of Insured Too Limited – Ancillary Personnel, Entities, Medical Directorships
The definition of “Insured” in a medical malpractice insurance policy can be more limited than one may assume. Coverage for certain support personnel (e.g. registered nurses, physical therapists, nurse practitioners, nurse anesthetists and physician assistants) may not be automatically provided. Similarly, if your practice is incorporated, a limited liability company (LLC) or professional partnership (LLP) your entity may not be afforded appropriate separate limits of liability – used in the event the entity is named in a lawsuit.
Finally, your services provided as a medical director for a hospital, allied facility or CLIA lab may not be automatically covered. Again, make sure to consult with your insurance professional to confirm who is covered, for what and where.
Malpractice Insurance as a Wealth Protection Device
Limit of Liability – Excess Limits
One of the most important (and difficult to answer) questions in insurance is how much limit of liability to buy. The standard in the industry is $1,000,000 per claim with $3,000,000 as a policy aggregate.
Most hospitals and facilities require $1,000,000/$3,000,000 as the bare minimum to be credentialed to a medical staff. That said, your own particular characteristics should also be taken into consideration including: specialty, exposure profile, practice venue, patient population, practice organization’s legal structure and subjective risk appetite.
Carrier Financial Strength
Confirming an insurance company’s financial size and strength can be crucial to ensuring they will be able to pay claims. AM Best is a widely-used rating agency that assigns letter and numeral grades to each insurance company based on their ability to meet financial obligations (i.e. overall financial strength) and their surplus size (i.e. their ability pay many unforeseen claims from multiple insureds). These ratings should be at least “A-, VIII” which translates to excellent financial strength with $100 million to $250 million in policy holder surplus held.
Without conforming the insurance carrier’s ability to pay your claim (and also many others’ claims) you run the risk of throwing your premium dollars away on an illusory product.
Medical malpractice insurance can be as complicated as it is necessary to managing the risk and exposures to liability confronted everyday by physicians, surgeons and other healthcare providers. Consulting with a professional to analyze your particular circumstances and risk characteristics is vital to ensuring appropriate coverage is extended for the least possible premium expense.