Insuring a Medical Entity with Medical Professional Liability Insurance

June 24, 2022
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Indirect Liability

Indirect liability exists when an entity is named secondary to a provider in a bodily injury medical malpractice claim.

This is referred to as vicarious liability in the Medical Malpractice Professional Liability industry.

The theory of vicarious liability stems from nautical days when it was called the captain of the ship doctrine.

In this philosophy, the ship’s captain is viewed as responsible for the behavior and safety of the merchants (and their merchandise)

and employees working onboard, including successful passage and delivery of the ship.

Similarly, in healthcare facility liability insurance, the entity can be held responsible for the medical service of all medical providers

(contracted or employed) working on behalf of the organization.

 They each bring a level of risk to the organization, even if the providers are insured separately for medical professional liability.

Medical facilities offer various services. Some of these are:

  • Aesthetic
  • Clinical
  • Surgical
  • Outpatient
  • Integrative wellness

Whatever the underlying service is, the health care entity should be properly insured with a separate limit of liability.

After all, claims often include the entity, which is frequently held liable if the judge/jury allocates some of its primary provider’s responsibility for negligence to it.  

Like all medical malpractice lawsuits and liabilities, allegations and claims can continue to be present into the future.

Entities, facilities, centers — all healthcare organizations need proper medical professional liability coverage.

They can be insured separately or in addition to underlying provider malpractice policies. Like in other healthcare facilities, the underwriting process involves questions to measure the organization’s size and scope.

Indirect liability premiums are developed by considering the likelihood of an entity becoming involved in a claim associated with the organization’s activities and, occasionally, the technical health care services of the providers.

A key distinction must be kept in mind in pricing and developing policies to cover health care entities.

The health care organization considers the number of outpatient visits, the annual revenue, and all of the allied mid-level advanced practice and medical doctors within the practice.

This occurs whether they are contracted separately, insured, or employed. 

This macro approach of looking at the group in the aggregate when developing the premium is the best assurance that the policy matches the risk and will cover all claims involving the entity.

Here we have an example of indirect liability and properly insuring a healthcare organization with clinical trial liability insurance. This is a sample of questions used by underwriting to inform the pricing.

Questions About  Activities:

  • Where will the trials take place?
  • What is the trial’s protocol?
  • How many principal investigators are there?
  • What type of medical and biotechnology research is involved?
  • What were the contract research organization and clinical investigator selection criteria?
  • How many patients will be involved?
  • What are the patients’ age ranges, health requirements, etc.?
  • How is follow-up handled?
  • Are informed consent forms in the native language of each participant?
  • How are participants compensated?

Clinical Trial Risk Management Practices:

  • Keep track of recent developments
  • Know how to best manage risks with insurance and other measures
  • Provide benchmarking to compare your organization’s internal risk management practices with those of peer-group companies
  • Recommend emerging best practices
  • Conduct an independent assessment of the trial design
  • Review informed consent and other documents to ensure completion, comprehension and readability
  • Manage potential conflicts of interest
  • Include pharmaceutical experts to work closely with clients to establish each case’s coverage requirements.
  • Be singularly focused on tailoring the clinical trial coverage for today’s medical technology and life sciences companies. By doing so, a wide array of proprietary product classifications to set rates and prices to meet their unique needs can be offered.
  • Be centralized in one location so clients can benefit from consistent underwriting practices, collaborative decision-making and proactive account management