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Liability Insurance101

Modified from information onhttp://practice.aap.org

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Objectives

• Know the types of malpractice insurance available

• Understand how coverage works when you change insurance policies

• Be comfortable negotiating malpractice insurance in reference to an employment contract

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Background

• Pediatricians are sued less than other specialities but…………………….

• 33% of pediatricians are sued in their career

• Indemnities (compensation for damage, loss, or injury suffered) generally are 25% higher than other specialities

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Which means you need insurance!

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Background

• A professional liability insurance (or medical malpractice insurance) policy is a contract between a physician and an insurer. – Physician pays annual premium to get insurer to

agree to defend claims and to pay settlements and awards levied against the physician

– Limits on how much the insurance carrier pays vary according to the specific policy and on the amount of money the insurer will pay per claim for all the claims in the specified time period the policy is in effect (usually 1 year).

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Background

• A malpractice insurance policy usually provides 2 kinds of coverage: – first-party coverage to a physician for defense costs– third-party coverage to an injured patient who

successfully wins a claim.

• Key Point: Policy agrees to indemnify the patient (ie, reimburse the patient or sometimes a family member) for losses from injury or death sustained as a result of a physician's negligence if that negligence can be proved in court or the parties agree to settle the case before trial

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Malpractice Insurance

• Options:1. Claims-made

• protects you from malpractice claims only if the company that insured you at the time of the alleged "occurrence" is the same company at the time the claim is filed in court

• once you leave the policy you will not be covered for any claims

2. Occurrence-made• any malpractice occurrence will be covered by the insurance

carrier, provided it was the carrier at the time of the alleged event, regardless if it is the carrier at the time the claim is filed

• even after the policy expires, it still protects you from any claims filed for incidents that occurred while the policy was in force

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Tail Insurance

• Key Point: If "claims-made" insurance is the benefit, additional insurance coverage will be necessary if you ever leave the practice and acquire a new insurance carrier in the new practice setting

• You remain liable for malpractice acts performed when part of the previous medical group

• The additional coverage is known as "tail insurance."

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Tail Insurance

• Tail insurance will provide malpractice protection for acts committed when covered by a "claims-made" policy by insurance carrier A, even if you are now covered by insurance carrier B

• The cost of "tail insurance" is a one time assessment that can be as much as 1.5 to 2 times a typical annual malpractice insurance premium.

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Obtaining Insurance

• Do not just look for the company that offers the lowest premiums; look for one that is financially sound and able to pay claims.

• Before purchasing any professional liability policy, check with the hospital(s) where you have privileges to make sure that a policy from that particular carrier is acceptable as proof of insurance.

• The rating for a particular company may be obtained by going to the A.M. Best Web site, www.ambest.com.

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Important Questions to Ask When Obtaining Insurance

• How long has the company been writing medical malpractice insurance?

• How many physicians does the company insure?• Assuming that the coverage is on a claims-made basis,

what are the rate projections for the next few years?• Will insured be protected by the state guaranty fund*?• Is there a possibility of assessments against insureds?• Is an up-front capital contribution required?• Is the insurance program endorsed or sponsored by any

medical association?*Typically all insurance carriers are assessed to finance the state guaranty fund. Only

insurers licensed to do business in the state are covered by guaranty funds.

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Important Questions to Ask About Coverage

• Are you covered for extracurricular activities (whether paid or unpaid)? Examples: providing sports examinations for the high school basketball team or volunteering (unpaid) at a community health clinic.

• Does coverage extend to your employees and, if so, what is covered?

• Is your policy "portable" if you practice in another state?

• Is locum tenens coverage available for someone who covers for you temporarily?

• What are the effects on coverage should you join another group?

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Obtaining Malpractice Coverage When Changing Jobs

• You can and should negotiate with practices or hospitals to pay part or all of the premium for tail coverage when changing jobs

• Get new policy with carrier that offers prior acts coverage – the premium factors in the past risk

• If forced to pay yourself, you can finance payments over time & avoid 1 large payment

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Employment Contracting

• If demand for new pediatricians is high, employers more likely to pay a share of the cost as a benefit

• May split cost of tail policy based on a percentage between employer and physician. For example:– Practice pays 1/3 of tail if employment ends in

3rd year of contract, but all if ends after 5 years

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Employment Contracting

• Make payment of tail coverage contingent on how employment is terminated. For example:– If practice terminates physician’s contract

without cause, practice required to pay tail– If practice terminates contract for cause or the

physician terminates employment without cause, the physician required to pay tail

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Some numbers…..

 

 

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Last Minute Advice

• Check with insurance providers in your area to determine if the malpractice coverage is adequate

• Determine if the losses covered are "pure losses" or "ultimate net losses." Pure loss coverage is only for the amount awarded to the plaintiff, whereas ultimate net loss will cover attorneys' fees and costs as well.

• Know the extent of the insurer's obligation to defend you. Will you be reimbursed for lost wages when in court? What services will be provided for you as part of your defense?

• How soon must you report a liability claim to the carrier in order to still be eligible for full coverage?

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