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Malpractice Insurance

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It’s estimated that one in three physicians will be sued over the course of their careers.  Therefore, not surprisingly, malpractice insurance and asset protection are things that physicians think about frequently. It is important to know what malpractice insurance covers and doesn’t cover. It will cover malpractice events related to your professional activities as a physician, including adverse events related to treatment or equipment and errors and omissions.  Some examples include lost medical malpractice lawsuits, settlements and arbitration awards, attorney fees and court costs, and HIPAA violations.  However, it will not cover intentionally criminal activity such as sexual misconduct or fraud.  Also remember that some of your best “malpractice insurance” is conducting evidence based medicine and managing risk in your practice, such as taking appropriate patient safety measures, getting appropriate consents, and treating your patients respectfully and kindly.

Resources

Alera Group: Jason Shah (Jason.Shah@aleragroup.com) is a physician who started a malpractice company, now under the umbrella of the Alera group - he's great and has helped quite a few members of the group with malpractice and tail insurance. Please mention that you're coming from PSG if you reach out!  

 

Types of Malpractice Insurance

There are two main types of malpractice insurance you may see in your physician contract: occurrence based and claims made.  During training, you probably had an occurrence based policy, which covers you not only for the time that you’re at the institution and hold the policy, but also after you leave and no longer hold the policy, as long as the event in question occurred during the time you were a policy holder.  While these policies also exist after training (especially at academic institutions), private policies held by medical groups are statistically more likely to be claims made policies.  These policies tend to be more affordable, but only cover you if the policy is in place when the actual claim/allegation is made.  Therefore, if someone files a lawsuit after you no longer hold that policy for an incident that happened while you held the policy, it would not be covered. 

 

This is why you will need a tail insurance policy or prior acts (AKA nose) coverage when you leave jobs where you were covered under a claims made policy, and should always try to negotiate those into your contracts. Rarely, you may need tail insurance for an occurrence based policy if the number of years the coverage is offered beyond the cancellation date is insufficient.

Malpractice Insurance Types

Choosing a Malpractice Insurance Policy Carrier

Most of you will simply be told who your employer’s malpractice carrier is.  However, if you are shopping for your own policy for your private practice or your side gig, it’s important to note that there are several types of malpractice policy carriers.

  • Commercial: Typically large for profit companies with lots of resources

  • Mutual: Owned by their policyholders and return the profits back to the policyholders, either as dividends or lower premiums

  • Captive: Owned by a large entity such as a large private practice group or hospital system

  • Trust: Usually non-profit entities sponsored by medical societies who want to provide malpractice coverage to their members

Shopping Malpractice Insurance

As with most insurance, you should shop around and get multiple quotes, as different companies may have access to different discounts or access to different plans.  You should also re-shop malpractice insurance from time to time to ensure that you have the best available deal.  Some practicalities include making sure the company is financially stable and licensed in your state, as well as reading online reviews and customer complaints about the company to see how they handle the claims process

You may get discounts for a number of reasons, including being board certified, having a clean malpractice record, belonging to a medical society, or having done a risk management course.  Know that premiums can change over time, and that premiums will depend on the insurance company’s actuarial risk projections. For example if you are in a location that is known as being particularly plaintiff friendly or in a specialty that’s more likely to get sued, your premiums will likely be higher.  Premiums can also go down over time if those risks change; for example, if your state decides to pass legislation limiting malpractice settlements, your premiums would likely decrease.
 

One thing to ask about is whether all policyholders could be responsible for helping to cover a claim if its particularly large.  This is called an “assessable” carrier.  While this can actually help keep premiums low, you have to decide whether you want to be on the hook for someone else’s mistakes.


Another thing to ask about is a “consent to settle” clause.  Sometimes in the communities we hear about people being pressured to settle a case despite feeling strongly about their innocence.  This is often cheaper for the insurance companies relative to going to trial, but not great for the physician who now has a mark on their record because they settled a frivolous case instead of fighting it. With the consent to settle clause, a settlement can not be reached unless you have agreed.  


Along these lines, each policy likely has limitations in the amount they’ll pay for defense costs (lawyers’ fees, expert witness fees, court fees, etc.).  Pay attention to what they cover, as some won’t cover lawyers’ fees, which can add up quickly. 

When you do get your quotes, before comparing them, make sure that the quotes have similar components (deductibles, coverage limits, and the clauses mentioned above) to make sure it's a fair comparison.

How much coverage should I get?

 

 

It’s important to choose the right amount of coverage. This is going to vary based on state, speciality, etc.  If you practice in a state that has a malpractice cap such that settlements cannot exceed a certain amount, you can choose to insure yourself only to that amount. Certain states or cities are known to have a tendency to have higher settlements given. Some specialties are more likely to have large judgments levied against them, such as OB-GYN, anesthesia, or surgical fields, and will require higher coverage limits.  There is even something called excess malpractice coverage, which can be thought of similar to an umbrella policy (which, by the way, does not wrap around malpractice insurance), in that it would provide extra protection against a lawsuit where the damages given were beyond your policy’s limits.

What is tail insurance and how much does it cost?

Where can I buy it?

Tail insurance covers malpractice costs for claims that are made after a claims made malpractice policy is no longer in effect.  It is a one time payment (that can be quite large!).  Policies can range between 1-2x the annual premium of your malpractice policy, or be much larger depending on many factors such as the location, specialty, what your policy covered, and statute of limitations for bringing a lawsuit. 

You should shop around for tail insurance quotes. Many people simply end up buying from the same malpractice carrier, as there may not be much of an incentive to buy from other companies if the other companies require an upfront complete payment or if the taxes and fees add up.  See below on guidance for when buying a stand alone tail makes sense.

 

When do I need tail coverage?

Tail coverage is necessary when you have a claims made policy and then decide to switch practices, retire or leave early, or resign or switch insurance. It’s important to choose the right amount of coverage, as well as the right length of coverage, as you only want to pay for the amount of time you need and getting a policy that covers a longer time period will be more expensive. The statute of limitations to file a lawsuit in most states is usually 2-3 years, although it varies in every state, and could be from the time that the event or complication actually occurred, or from the time that it was found out.  Additionally, if you treat children, the statute of limitations for most states starts after the patient is 18, meaning that they can file a claim even after 18.

It’s important to check your policy and see how long after you leave your job and cancel your policy you have to buy your tail insurance policy, as many claims made malpractice policies offer 1-2 months of tail insurance.  This means that typically your tail insurance policy needs to be bought within 1-2 months of leaving your job.
 

Occasionally, you can get free tail coverage from your carrier if you retire from the practice of medicine, so keep that in mind if you’re retiring.

Tail Coverage Need

Special side gig consideration

I’m on a group malpractice policy provided by my locums or telemedicine company and they said I don’t need tail.  Is that accurate?

Not entirely.  You will be covered as long as that group policy remains active, but keep in mind that these companies may switch carriers, the company could go bankrupt or be acquired, etc.  In these cases, if the group policy is canceled, you may be left on the hook for tail coverage. If you can, negotiate in a clause where if the group policy is canceled, they will pay for tail coverage (however, this may not be helpful if the reason the policy is ending is because the entity goes bankrupt).

Stand Alone Tail (SAT)

This section has been contributed by our sponsors at the Alera Group.  It was written by Jason P. Shah, MD, a physician who now specializes in this area and is Managing Partner of the Alera HCL Team.  If you are interested in getting tail insurance quotes, please send the information from the ‘What is needed to apply’ section below to jason.shah@aleragroup.com with subject: PSG - SAT Submission. 

Background

Liability related to medical care can arise years after the patient encounter. Because of this  “long tail” exposure, special attention has to be paid to how medical professional liability (MPL) insurance policies cover the exposure arising from “prior acts” (i.e. patient care  delivered before the policy effective date). Since most such policies are written on a claims made basis, it is very important for physicians to be aware of how the coverage works and  what options are available.

Occurrence vs. Claims-Made

There are two basic types of MPL policy forms: occurrence and claims-made. The key  difference is in the way the policies respond to a claim.

Claims-Made: Why do you need coverage for prior acts?

Claims-made coverage ends when the policy ends. When the policy expires or is canceled, by default, new claims arising that are related to care delivered  in the prior period are no longer covered. In order to continue coverage for the claim, the  policy must be renewed (either with the same carrier or a different one that picks up the same  retroactive period) or prior acts (“ ail”) coverage must be purchased.

Options for covering prior acts

  • Endorsement on existing policy (Extended Reporting Period endorsement)

    • Known as a tail endorsement 

    • Most standard carriers offer free tail in the event of death, disability or retirement

  • Separate stand-alone policy with a different carrier just for tail (SAT)

  • Moving coverage to new policy that keeps the same retroactive date (“nose” )

    • Note: with nose coverage, you will still have tail liability in the future

Considerations and recommendations for SAT

  • At the time of writing, stand-alone tail policies are at best 30% less expensive than the premium for the ERP endorsement from the incumbent carrier, and in many cases, they are not the best option (due to associated surplus lines taxes and fees and the inability to pay in installments).

    • Consider SAT quotes if the ERP quote is greater than $25k. If the premium is lower than that, it is unlikely that the savings in the SAT market will justify the purchase.

  • Before considering a SAT policy, if applicable, review your employment agreement provisions regarding tail.

  • Have that section available for the broker to review to ensure the SAT is compliant with any relevant agreement provisions.

What is needed to apply

  • Start date and end date of retroactive period that is needed to be covered by tail,

  • Details of practice: location, full-time/part-time, if OB, average number of deliveries

  • Physician CV

  • Current policy certificate of insurance

  • Claims history report from current carrier (and if applicable, prior carriers)

  • Current carrier ERP endorsement quote

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