The Doctors Insurance Agency has been working in the Medical Professional Physician and Facility Liability insurance market for 30 years.
Naturally during this time we have seen many things change. The observation that the insurance industry is a financial market has never been clearer than in these last 18 months. This time - during the pandemic, we have seen premiums fluctuate significantly.
Some renewals are 50% higher than in prior years;
While other renewals are flat and stable. Some carriers have left the business, others taken over by regulators because their financial reserves were not strong enough.
There has been a filtering out of lesser committed and perhaps lightly financed carriers.
During our years of work specializing in facility and physician liability insurance, we have developed partnerships with other specialty companies.
One of those companies is Ultra Risk Advisors in the Seattle area.
Jackie Johnston, the broker producer and underwriter for Ultra Risk recently published an article about the medical professional liability.
I thought it was important to summarize some of the main points of her article.
She focuses on five important areas in her article entitled:
Things to know about purchasing medical professional liability.
These top five reasons all underscore that this is an important decision. In fact she argues that it’s one of the most important decisions physicians will face.
The choice of your Medical Malpractice Insurance carrier can limit or support your medical practice. The choice of carriers and the premium can support growth and profitability or can exclude important coverages
and even go so far as to dictate what you can and cannot do in the practice. As long as your medical practice plan is consistent with your education and training and experience,
the policy should not contain your growth.
►Insurance is a highly regulated industry; which results in variances in practice and coverage restrictions/requirements from state to state.
Important considerations when shopping for medical malpractice insurance.
Companies have been spending their savings….
- Financial Strength/rating of the carrier: Insurance carrier ratings are determined by A.M. Best and can be researched at www.ambest.comor on the website of the carrier.
These ratings can be tied to the economy and general investment trends.
Jackie points out that during this time (of market hardening, (companies taking adjustments due to years of ‘flat’ premium renewals, insurance carriers were drawing down reserves (spending their savings) to maintain premium stability.
Consequently, the financial strength ratings had fluctuated.
Occurrence is not the presumptive choice
- Occurrence and Claims Made:The two main types of malpractice insurance are occurrence and claims made.
The distinction of the two is simple: occurrence policies cover claims presented in the future stemming from services insured will policy was active.
Claims made does not promise coverage in the future. It is a real-time policy that responds only if the policy is active and the claim stems from services provided after the retroactive date.
The strengths of the claims made policies it is much less expensive and often times the savings in annual premium more than pays for the tail at the end of the policy.
Occurrence insurance covers the physician regardless of when the claim is reported.
With claims made coverage, the incident must be reported while the policy is in force (again, this is typically for a one-year term) and have occurred during the period of time covered by the policy.
Prior Acts or Tail Coverage: Physicians on claims made policies should make sure that prior acts or tail coverage is provided allowing the physician to be protected after the policy period is over.
The claims made contracts are less expensive because they are not committing to covering anything other than the present time. Deferring the extended reporting endorsements to the date you cancel can save thousands of dollars of premium no matter how expensive that tail premium is.
When thinking about tail it’s important to consider the financial strength, longevity, and track record of the carrier to ensure it has the wherewithal to purchase prior acts or tail coverage.
Should the Carrier completely relinquish the right to offer settlement?
- How does the Carrier handle claims. Specifically, who holds the power to consent to an offer, vs. staying in the fight and going through a prolonged legal battle.
Consent to Settle Clause & “Hammer” Clause: You should try to obtain a policy with a “consent to settle” clause which requires the carrier to obtain your written permission to settle a claim against you. If not, the carrier can settle a claim that you believe is very defensible without your permission.
A “hammer” clause is one in which the insurance company must obtain your written permission to settle a claim against you BUT YOU ARE RESPONSIBLE for all costs exceeding the amount of the settlement proposed by your carrier if you will not agree to that settlement. If you push the case to trial and you win—no problem. But if you lose—you will have to pay the difference between the amount of money the case could have been settled for and the actual costs of awards and extra defense.
You could have much more than the 1 million limit
- Defense Costs “Inside” vs. “Outside Policy Limits”:If your policy pays defense costs “outside” the limits of liability then your defense costs do not erode the limits of liability of your policy. As an example—if your policy limits are $1 million per occurrence and $3 million aggregate and your defense costs for a case are $100,000, you would still have $1 million to cover a potential award for that claim. If your policy pays defense costs “inside” the limits of liability then you would have only $900,000 left to cover a potential award in the previous example. Clearly—it is preferable to purchase a policy with defense costs “outside” the limits of liability.
A written demand contract can limit your options to get out and to join another insurance carrier is happy as you may be with this choice of your insurance company there might be job changes career changes even investment opportunities that require you to switch incident reporting triggers offer the flexibility needed in today’s fast-changing healthcare market
5.Incident Reporting vs. Written Demand for Damages: How each insurance company defines a “claim” is another important consideration when comparing policies.
“Incident reporting” allows the physician to report an adverse outcome to the carrier as a potential claim. This is important because remember that for a claim to be covered—a claims-made policy requires that the incident BOTH happen AND be reported as a claim while the policy is in force!
If an insurance company requires that the insured receive a “written demand for damages” in order to consider a claim to be reported—than the physician must wait to be sued before the claim is recognized! This can be a real problem for physicians wishing to change professional liability carriers: Most insurance companies would decline to offer a policy to prospective clients who can expect to be sued in the future for past adverse outcomes. The carriers often consider such a situation to be the same as “buying future claims.”
Our team at the doctors insurance agency expands throughout the country we bring a dedicated and specific commitment experience knowledge and understanding of this market.
Let us in our underwriting partners go to work for you.