The only thing constant is change. Insurance companies are continually redesigning their insurance policies to cover the ever-growing exposures for clients. Medical professionals can help protect their assets by shifting certain risk exposures to an insurance company for an agreed premium. In return, the insurance company provides immediate legal defense from seasoned claim professionals and policy coverage to provide legal liability protection up to the limit purchased. Here are some basic questions to review with your professional liability insurance counselor to help evaluate various Medical Professional Liability Policies.
What types of coverage are currently available in the insurance marketplace?
In Florida, depending on the type of professional liability policy, most companies issue a "Claims Made" policy form; there are also a few companies that issue an "Occurrence" policy form, but these tend to be more expensive due to the long "tail" exposure included in the premium.
What is the difference between a Claims Made and an Occurrence form?
The claim trigger that activates the policy is the difference and here's why:
Claims Made policy form: designed to provide coverage for claims against the insured which are reported to the Company during the active policy period; provides liability protection for medical professional services rendered after the retroactive date and before the expiration date of the policy. With few exceptions, if the malpractice insurance policy is terminated by either the insurance company or the Named Insured, then an Extended Claim Reporting endorsement or "tail" must be purchased to keep the policy open and active in order for claims to be reported. Tail rating formulas vary widely by company and have many factors to be considered, such as length of policy period, exposure, the Insured's claims history, actuarial claim trends in the medical specialty, the legal environment, and length of reporting period to be provided. Generally, a tail premium range may be anywhere from 175 percent to 250 percent of the mature undiscounted premium.
Occurrence policy form: designed to provide coverage for claims against the Insured which occurred during the policy period regardless of when the claim is reported. Since the insurance company may not discover the severity of the claim for years to come from losses claimed to have occurred within the policy period, this policy form is said to have a long tail exposure that can be very unpredictable. Also, the legal environment is always subject to change, and the limit carried previously may be severely inadequate by the time the claim is reported, so there may not be enough coverage at claim time, or even worse, the insurance company may no longer be in business. Occurrence policy form premiums are usually much higher than Claims Made premiums due to the unpredictable long tail exposures being factored in, and thus not widely used for professional liability.
How much of my personal assets do I want to risk in the event of a large claim?
Shifting your risk to an insurance company and choosing the proper limits for your liability is a personal choice and a business decision to consider, based on many factors including: current contractual obligations; the unpredictable legal environment including recent jury awards, and trends in claim frequency and severity for similar medical professions. Consider what limits you are required to carry by contract. What is your estimated legal responsibility? How much are you willing to risk via large deductibles? Are your asset protections reviewed annually? What are your choices?
What premium options are available, including any eligible discounts?
Each insurance company establishes their own actuarially-sound rates and discount programs which must be filed and approved by the Florida Department of Financial Services (FLDFS). Insurance rates are highly regulated and a lengthy bureaucratic process with many rigid legal guidelines. Typically, premium rates can vary by practice location (territory), limits, deductibles, eligible discounts, medical specialty, as well as claims history - all of which are subject to company underwriting guidelines. Premium payment plans also vary by company - some offer flexible direct bill pay plans; others have only annual or quarterly plans, or possibly offer outside finance company options which incur additional fees.
What is the company's defense posture and what are their historical closed claim results regarding Total Indemnity Paid versus Total Claims handled by the company?
Medical professional liability provides protection for claims arising out of the rendering of medical care for which the medical professional is legally responsible. It is very important to have a financially strong and stable carrier that is experienced in defending medical professionals - especially one with a favorable track record. Companies with proactive Risk Management programs and an aggressive approach to defense, backed by a policy with broad coverage (incident sensitive, with defense coverage provided in addition to the indemnity limit), and one that does not cap legal counsel fees would be most favorable to Insureds.
What is not covered under the policy and what are the restrictions?
The exclusions in a policy take coverage away, or restrict coverage to the Insured; it's important to know what the policy does not cover by reading the policy exclusions. Sometimes the exclusion can be covered by purchasing other policies designed to best cover that exposure on a separate basis; sometimes exclusions can be "bought back" for a higher premium. Your insurance counselor should help you navigate the coverage options.
What is the policy definition of a claim, and what is the procedure to report to the company a claim or incident that could reasonably lead to a claim?
Read your policy carefully to find out how it defines the claim "trigger" and other important claim-related factors, including whether it is based on an incident or an actual demand for money. Find out if a request for records constitutes a claim and what the company procedures are in this area. Be sure the definition of "Insured" and other pertinent policy definitions are broad and well-defined in the policy form. Also, the procedures on how to report a claim to the company should be very clear.
How broad is the coverage?
It's important to consider how broad and flexible the policy form is as it relates to your individual needs; evaluating the complexity of your business; anticipating growth needs and your exposures is very important. Does the policy cover only patient injury, or does it extend to other related professional activities, such as peer review, credentialing, and utilization reviews or licensing defense, including Medicare or Medicaid legal liability? Is there additional premium to include staff members? Does it have territorial restrictions in certain geographical areas? Is the entire practice covered including all procedures? Are there endorsements available to customize your coverage needs and what is the premium basis? Key: identify and communicate your particular needs and find out how each would be addressed by the policy.
If there is a practice change, what are the company procedures to address increased or decreased exposure?
Many times a medical professional will have a change in the practice environment or procedures; is no longer performing; or has additional training. It's important to have a broad from policy and a flexible company that can address changes and provide premium quotes upon receipt of your written intent of change. Most all companies require written notice of any/all practice changes as they occur during the policy year, so they will always have accurate current information in their files in the event of a claim.
Does the company and/or the agent of the company provide prompt, friendly proactive service and a positive customer service attitude?
Good communication, timely information and a friendly professional on the other end of the phone is a must! Customer satisfaction-oriented companies and agents should always be servicing your account. The business relationship should be open, professional, and friendly with prompt easy access.
What are the cancellation procedures of the policy?
A medical professional may need to cancel coverage due to an unforeseen change in practice, or retirement, et cetera. All policies specify cancellation procedures, however options can vary by company. Some have cancellation penalties (usually either a fee of 10 to 25 percent of the unearned premium). The policy should specify how the company may cancel under different circumstances; what specific procedures would take place; a time frame for each; as well as if the Insured chooses to terminate the policy. Nonpayment of premium cancellations may also forfeit the extended reporting (tail) coverage. All carriers require written notice.
These Medical Professional Liability Policy Hints were summarized from MPL section of
The Informed Physician's Guide to Coverage Decisions.
Jeri Cascio, AAI, CPIA, PIAM is an Insurance Counselor and Healthcare Division VP at Merrill Insurance. As a Professional Liability Specialist, Jeri has been providing affordable risk solutions and value-added services to Florida Physicians and other Medical Professionals for over 20 years. Jeri Cascio can be contacted by email at Jeri@merrillinsurance.com.