Provided By Derrick Yohe, Senior Financial Advisor at Larson Financial Group
Malpractice coverage comes in many forms, and is intended to protect someone in a professional role against the claims arising from a patient or client that feels wrongly treated. Many physicians have a medical malpractice policy that will lapse this summer if a renewal premium is not paid, and it’s imperative that you maintain continuous coverage while you are practicing.
The medical malpractice insurance marketplace is highly complex, and a lack of understanding can lead to mistakes which can cost you time, money and could potentially cause major problems with your medical credentials. Most physicians are already pressed for time and resources, and yet it’s critical to educate yourself on several policy features before making a decision. Asking yourself these 4 questions as you approach your renewal date should help you find a policy that is suitable for your needs:
1. How much coverage do you have, and are the limits commensurate with state laws?
By far the most common types of medical malpractice insurance are “claims-made” and “occurrence-based” coverage, and it’s important to understand the difference:
- Occurrence-Based: An “occurrence” policy covers claims arising from events occurring while the policy is in force, regardless of when the claim is first made. This means that if there is a claim or suit against you, as long as you were insured at the time of the incident or treatment that resulted in the claim or suit, the policy will still apply.
- Claims-Made: A “claims-made” policy covers claims that occur while the policy is in effect. If it does not, run-off coverage (tail) must be purchased to cover residual claims reported later. Claims-made policies are cheaper than occurrence policies for the first several years of coverage, but premiums will gradually increase as the liability increases.
It’s also essential that you choose an insurance carrier licensed by your state’s department of insurance and currently in good standing. If you have any doubts, don’t hesitate to call state medical organizations and inquire about the insurance company’s reputation. Most standard policies also include defense for regulatory proceedings brought against a physician by federal government for the enforcement of legislation such as the Occupational Safety and Health Administration (OSHA), Emergency Medical Treatment and Labor Act (EMTALA), Health Insurance Portability and Accountability Act (HIPAA) and Stark Laws.1
2. Do you know what your coverage is and what its limits are?
The “tail” (extended reporting endorsement) provisions are arguably the most important variables between policies to consider. It allows an insured physician to extend his or her coverage for a specified period of time after the cancellation or termination of a policy, essentially converting a claims-made policy into an occurrence policy because it allows you to report claims in the future to that carrier even though the policy period has ended.
Tail coverage is offered at the termination of a policy, except when a policy is cancelled for non-payment. Tail costs are typically 150% to 250% of the annual policy premium, but some carriers offer earned tail coverage upon retirement depending on the length of time the physician was insured by the carrier.1
It’s also possible to obtain prior acts (“nose”) coverage when switching to a new carrier. This is accomplished by setting the retroactive date back to the original effective date of your first policy, which is why it’s also sometimes referred to as retroactive coverage. Physicians usually have a choice of whether to go with an extended reporting period from a previous carrier or retroactive period coverage from a new carrier, but sometimes it’s out of their hands due to employment contracts or coverage limitations.2
3. Does your coverage have a “hammer” clause giving you the right to determine if a case is settled?
In most cases, carriers won’t settle a claim without the doctor’s consent. However, some policies have a “hammer clause” that allows the carrier to assert pressure on their insured on whether a case should be settled. If the physician’s medical malpractice insurance policy doesn’t have a hammer clause, he or she has the absolute right to refuse to settle. If he opts to go to trial, his insurer has no choice but to respect that right and continue to defend him.3
Even if the medical facts were on the doctor’s side, a settled claim can show up in a physician’s professional history, affecting their professional reputation and potentially increasing their future risk of similar claims. Having a consent-to-settle clause in a medical malpractice insurance policy may allow a physician to retain a higher degree of authority in this critical decision, and maintaining confidentiality in the terms of any settlement can eliminate or limit the impact of a claim on potential future claims.
4. When was the last time you shopped for competitive rates?
It never hurts to start the renewal process early, even as much as 6 months prior to the renewal date. Be proactive by providing your agent or insurance markets with loss runs, coverage choices and risk management efforts at least four months in advance.
If you’re utilizing the services of a broker or agent, make sure to quickly respond to requests for information and make note of key items such as policy limits, deductibles, requested effective date and prior acts coverage. If they present you with a price comparison of other carriers, you should clarify with them whether the figures are basic insurance rates prior to any discounts or credits being applied. You may get a much more competitive rate if you complete a full submission to the other insurers for a quote.4
Finally, when analyzing different insurance companies, the A.M. Best Company’s ratings is a useful industry benchmark. You should always seek out a carrier with an A+ or A++ rating when comparing policies. Also, take note of the company’s reinsurers and their reputability. Support from A-rated reinsurers indicates a successful track record of balancing risks and financial stability, which is important because if the company were to become insolvent you could potentially be on the hook for defending or paying a malpractice claim against you.
- Capson Physicians Insurance Company “Renewing Your Medical Malpractice Policy: 8 Things to Watch Out For” (November 3, 2014) http://www.capson.com/renewing/guide-to-purchasing-medical-malpractice-insurance
- Texas Department of Insurance “The Medical Liability Insurance Shopping Guide” (February 9, 2017) http://www.tdi.texas.gov/commercial/pcmedmal.html
- Locum Leaders “Assessing Your Medical Malpractice Insurance Coverage Options” https://www.locumleaders.com/news/practitioner-news/assessing-medical-malpractice-insurance-coverage-options/
- Cunningham Group “7 Secrets Your Medical Malpractice Insurance Agent Will Not Tell You” http://www.cunninghamgroupins.com/7-secrets-your-medical-malpractice-insurance-agent-will-not-tell-you/
Insurance services offered through Larson Financial Group, LLC, an insurance agency.
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