Frequently Asked Questions About Malpractice Insurance
The following information outlines in general terms insurance coverage, conditions, and definitions. Examine an insurance policy carefully for any exclusions, limitations, or any other terms or conditions that may specifically affect coverage. The terms and conditions set forth in an insurance policy prevail.
What resources are available to assess the financial condition of an insurance company?
Insurance consumers should be very aware of the financial shape of the companies that will be relied upon to protect financial assets as well as professional reputations. Before choosing to give this responsibility to an insurance company, most insurance consultants advise that the financial rating, company history and claim paying ability be considered. There are several insurance industry analysts’, most accessible on the web, that provide detailed financial analysis of most insurance companies. Some of the insurance industry analysts' most relied upon are AM Best, Duff & Phelps, Moody's, Standard & Poors' and Weiss Research.
What types of professional liability policies are offered by malpractice insurance companies and what are the differences between each policy type?
An Occurrence policy form, with stable premium rates that do not automatically increase each year, provides coverage that responds to a malpractice incident arising out of professional services and/or cares rendered during the policy period regardless of when the actual claim is reported. Should an Occurrence policy be canceled, the purchase of “tail” coverage to extend the reporting period for claims is not required.
A Claims-made policy form requires coverage to be in effect on the date care rendered and continuous and still in effect on the date a resulting claim is made. Should a Claims-made policy be canceled, tail coverage must be purchased to provide coverage for claims which may have occurred while the policy was in effect but not made until after the cancellation date. Most Claims-made policies provide tail coverage at no additional premium in the event of death, permanent disability or retirement. The conditions for the provision of tail coverage for no additional premium may vary from one company to another and are specified in the policy language.
Claims-made policy premiums are determined based on the 1st Claims-made year policy effective date (referred to as the retroactive date). If a policyholder purchases a Claims-made policy for the first time, the applicable premium is based on the 1st Claims-made year premium rate. Claims-made premiums are structured to increase, typically through the 4th renewal policy effective date.
Prior Acts coverage, referred to as “nose” coverage, is the provision of coverage from a new malpractice carrier effected as of the retroactive date indicated on an insured's current Claims-made policy. Prior Acts coverage provides an option to switch companies without purchasing tail coverage. However, as coverage continues on a Claims-made form (and the Claims-made year premium is determined by the retroactive date) the purchase of tail coverage may be required in the future.
A Convertible Claims-made policy type provides the option to change from a Claims-made policy to an Occurrence policy without ever having to purchase tail coverage, provided conditions specified in the policy language are met.
Understanding the differences between the various types of professional liability policies allows an insurance consumer to appropriately assess the cost of coverage now and in the future. In addition, an insured can also make malpractice insurance purchase decisions to adequately protect assets now and in the future. Although most “suits” must be filed within a two (2) year statutory period, the “trigger” date is the date of discovery of an alleged negligent act, which may not necessarily be the date care was rendered.
Not all policy types are offered by all malpractice insurance carriers.
What are some of the important clauses or definitions specific to professional liability insurance?
The “consent to settle” language specifies an insured's rights in claim resolution. Policy language may give the right to settle a claim or to continue through trial to either the insurance company or to the insured. Policy language providing the insured the unconditional right to agree to a settlement is referred to as “full consent”. Consent to settle language which includes conditions for insured reimbursement to a company should a settlement offer be rejected and a resulting award exceeds the settlement offer is referred to as a “hammer” clause.
The provision of legal defense costs is also specified in the policy. Defense costs may be provided within the policy limits, thereby reducing the limits available for settlement or an award. Or legal defense costs may be paid in addition to the professional liability policy limits.
Other reimbursed costs to the policyholder in the event of a claim may include loss of income or per diem reimbursement due to trial attendance.
Policy terms or conditions are specific to the policy language of each insurance company.
In addition to malpractice protection for alleged professional negligence, is coverage provided for any other legal proceedings associated with a healthcare professionals’ practice?
Many professional liability insurers include other coverage parts or endorsements within policy language extending insurance coverage for incidents unrelated to direct professional services or care.
Coverage for legal defense costs for administrative or regulatory hearings or investigations may be provided. These may include professional licensing board complaints, billing errors or omissions investigations/audits, or HIPAA proceedings.
Liability insurance protection for “premises” incidents like “slip and fall” claims, personal injury claims for libel or slander, or for property damage to others may also be included within a professional liability policy.
The provision of extended or additional coverage, if any, is specific to the policy language of each insurance company.