Medical professional liability insurance is a must-have for anybody who practices medicine or is involved in treating patients. But it’s not enough just to have a policy.
According to a 2016 study by the New England Journal of Medicine, about 75 percent of physicians will be sued for medical malpractice at some point in their careers.
Therefore, it’s important to evaluate and compare medical malpractice insurance and the policy being offered to ensure it will provide adequate coverage if and when you need it.
Here are eight factors you should consider when evaluating coverage options:
1. Claims made or occurrence?
Perhaps the most important factor when evaluating medical malpractice insurers is whether their policies are occurrence or claims made. This helps you determine when a policy covers an incident, especially when there are changes in insurance coverage.
An occurrence policy will pay a claim based on when a potential malpractice incident occurred, even if you no longer carry the coverage when a suit or complaint is filed.
A claims made policy only provides coverage for as long as premiums are paid. You must be covered by the policy both at the time of an incident and at the time a claim of malpractice is made.
2. What can trigger a claim?
The claims process can be triggered in one of two ways.
The first is an incident report. This enables a physician to report a potential incident to his or her malpractice insurer as soon as it occurs.
By reporting incidents to the insurance company before a patient’s claim is made, physicians can ensure they are covered by a lawsuit filed later, even if they have a claims made form of insurance. Once an incident is reported by a physician, the insurance company essentially becomes responsible for any claim that may arise from it, even if the policy is cancelled before a complaint is filed.
The second trigger is written demand. This means the malpractice carrier is not responsible for covering an incident unless and until a patient takes action, either by filing a lawsuit, demanding compensation, or enlisting an attorney to investigate. So if the policy was claims made coverage and it lapsed or was replaced before a patient took action, the insurer would not be liable for damages.
3. What is excluded from coverage?
All malpractice policies contain exclusions. This is language added to the policy stating that the insurer will not cover losses resulting from certain activities. You should review the policy to ensure that certain procedures you may perform are not excluded. In addition, duties performed as a medical director or consultant may be excluded from coverage as well.
4. Is there a consent-to-settle provision?
If your malpractice insurer settles with a plaintiff, the resulting settlement will remain on your record and affect your insurability in the future. Insurers prefer to settle some cases to avoid a large payout through the legal process.
But with a consent-to-settle provision, the insurance company has to obtain your written permission before they can settle with a complaining patient.
Keep in mind, however, that the policy may also include a “hammer” clause. If your policy contains this clause and you refuse to consent to a settlement, the insurer’s liability will be limited to the amount recommended in their settlement offer.
5. How are defense costs handled?
Some policies will include your legal and attorney fees within your liability coverage limits, while others will not.
For example, a typical policy may have a $1 million liability limit per occurrence. If you incur $100,000 in legal costs to defend against an incident, a policy that pays those costs “inside” your liability limits will only pay a maximum of $900,000 toward a judgement. Basically, the $100,000 in legal costs count toward the $1 million limit.
But the same policy that pays defense costs “outside” liability coverage still leaves the full $1 million toward a judgement. Attorney expenses do not count toward the liability coverage limit in an “outside” policy.
6. Will the insurer offer nose coverage?
If you’ve already practiced for a period of time and are switching malpractice carriers, it would be beneficial for your new insurer to offer prior acts coverage, also known as “nose” coverage. This endorsement enables you to obtain coverage from a policy you currently pay premium on for an incident that occurred prior to the policy’s effective date.
7. Is the insurer an admitted carrier?
Admitted carriers are regulated by state insurance departments. This means that rates and policies are approved by the states in which insurers sell policies. Admitted carriers are also backed by a state guarantee fund in the event they become insolvent and cannot meet their obligations to policyholders.
8. What is the insurer’s financial strength rating?
One of the most important factors when choosing a carrier is its financial strength and stability. After all, if you’re required to pay a judgement of, say, $1 million, you need your insurance company to be able to write that check.
When choosing a malpractice insurance provider, limit your search to companies that are rated at least an A- by A.M. Best, the most prominent rating agency for insurers.
Before you buy, here's what you need to cover all your bases:
The Ultimate Guide to Medical Malpractice Insurance in 2019