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Medical Malpractice Insurance Blog

Discussing contemporary medical malpractice insurance issues

Physicians, Midwives and other health care providers are newly finding that they can access a Malpractice Insurance market that previously had been available only to very large groups and to practitioners who could not find coverage because they did procedures that were considered high risk, like bariatric surgery, or had an extensive claims history or other underwriting concerns.  This market is the surplus lines market and more and more it is becoming available to mainstream practitioners.  Surplus lines companies can offer more flexible coverage terms and more competitive premiums than are available in the standard markets and many are highly rated.

A little history and law will be helpful to understanding this product.  There are generally two forms that Malpractice Insurance companies can take to be approved to sell their products in a given state; admitted and nonadmitted.  Both of these forms require that the states in which the company is selling its products submit significant financial documentation to show that it meets the state’s requirements for financial solvency and adequate capital.  Admitted companies must take one further step and submit to the state for approval  the premium rates it intends to charge its customers and the policy forms, and endorsements that it will issue together with any actuarial, policy and procedures information required for state review.  After the state has reviewed the company’s rates and forms and approved them, the admitted insurance company can sell only within the rate parameters that have been approved and only on the policy forms that the state has approved.

The Nonadmitted or surplus lines insurance company is approved to sell without submitting its rates and forms for state review.  It is limited by any state laws that apply to all companies but is otherwise free to meet insurance needs with great flexibility and if the risk is attractive to it, can offer pricing that can be significantly better than the premiums offered by admitted companies that are locked in to their state-approved premiums.

The natural question is why would any company want to be admitted?  That’s where history comes in.  Surplus lines was designed to meet the needs of markets where there were no admitted companies.  So, for example, when Teleradilogy and Bariatric Surgery first emerged, there was a paucity of admitted companies willing to cover these exposures and the surplus lines market was needed.  In order to show unavailability, most states required the insurance broker securing coverage in the surplus lines market to demonstrate that it sought this protection in the admitted market and was rejected by at least three companies.  As this evolved, some states maintained a list of risks for which it recognized that insurance was not available, and for which three declinations were not necessary.  The states also recognized that the consumer protection offered by approval of rates and forms might not be necessary to large and sophisticated customers and some states excluded these customers from the three declination rule.  The last steps that have affected these rules have come from federal statutes that supersede state law and allow the sale of surplus policies without declinations on a customer by customer basis or even on any basis.  The clear direction of this history is to make surplus lines policies as readily available to small consumers as to large ones.

There is one other aspect of this dichotomy that bears discussion.  Most states maintain a guarantee fund which protects policyholders insured in the admitted markets from company failures.  So if the admitted company insuring a party goes bankrupt, the state fund will step in and take over management of all claims and for policies that had per claim limit of, for example $1,000,000, the state will provide protection of approximately $300,000-$400,000.  For an insured in that position, that is good news and bad news:  good news because there is some coverage where there otherwise could be none; and, bad news because history has shown that state management of these claims is simply an effort to close down a bad situation and many cases that would have been defended by a solvent insurance company and won, are settled at the per claim cap and besmirch the insured’s claims record.  And where does this guarantee fund money come from?  It is taxed against the remaining admitted insurers in the state selling that line of insurance.  So even though they behaved responsibly, they bear the cost of the irresponsible behavior of the insolvent insurance company that was their competitor.

The disinclination to participate in these guarantee funds is one of the primary considerations for many companies who elect surplus lines status.  At the end of the day, they do not mind sharpening their pencils and offering competitive rates to prospects that deserve it, but if they operate lean, they don’t want the state coming with its hands out for millions of dollars to cover the behavior of companies that acted irresponsibly.  The second motivating consideration is that surplus lines companies are confident in their abilities to underwrite risk responsibly while still fashioning flexible coverages that may not be available from admitted carriers, coverages for such exposures as HIPPA, Directors and Officers and Cyber losses.

So what’s the best way to insure, admitted or surplus?  The answer is simpler than it seems.  Healthcare professionals should get quotes from both markets and should assure that quotes are presented only by companies with high ratings of “A-“”Excellent” or better from A. M. Best, the nation’s oldest and most respected insurance company rating service.  Certainly, A. M. Best has called some wrong, but it remains the best and most reliable rating service and there are many services that give high rating to companies whose financials and experience do not warrant a good rating.  If a company has no A. M. Best rating or a rating below “A-“ the insured is accepting significant risk and should decline those offers.  I would say the same for admitted companies, even though they are approved by the state.

Secondly, the brokers presenting the admitted and surplus lines products should be asked to make a written comparison of the differences in price, ratings and policy terms offered by all companies being considered.  Also, determine which attorneys the companies will use to defend you.  Make sure they are recognized in the field.    If, as a customer, you see greater value offered by a highly rated surplus lines company, you should not hesitate to go that route.

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Over the past decade, we have witnessed growth in the merger of smaller practices into single specialty large group medical practices and multispecialty physician groups.

This growth has been fueled by a number of factors including the desire to exercise greater leverage in negotiating with health insurance companies and implementing savings from bulk purchasing and central management. Many of these groups hired experienced management staff to assure that all available benefits were obtained as quickly and efficiently as possible. Many delegated management to the founding members of the group. All experienced significant growing pains. Some more than others.

Since one of the largest expense line items for large groups is the cost of medical malpractice insurance, it is an issue that is often tackled early, shortly before or after the group is formed. When smaller groups merge, the new practice is faced with its physicians insured by many companies with each old group having its own corporate coverage for the former corporations. Since all of these old practices will be running off their accounts receivable for many months, the old corporations cannot be closed and coverage should be continued until the corporations are legally closed, either through the purchase of tails (See former blog posting dated October 19, 2009), continuing the former coverage, or endorsing the old corporations onto a new policy.

It is important to address the issue of unifying coverage for all members of the group under one company to avoid the possibility of cross claims between members of the group that can occur when a number of doctors are on the same claim but represented by different companies. Also, unifying coverage brings other benefits discussed below. Often, however, this issue is not addressed until after the group has begun operations. It is important to have malpractice insurance coverage in place for the new corporation on the first day of operation. This coverage may not be available in the standard malpractice insurance market if no one company insures a majority of the group’s physicians. If a group has to go outside the standard market for “stand alone” corporate malpractice insurance coverage, the cost, while usually manageable, is often significantly more expensive than would be available in the standard market and can carry heavy premium front loading so that there is not a pro rata refund if the policy is canceled when the group obtains a single malpractice insurance policy. Clearly, the best way to proceed is to get this all done before going live with the new corporation. As a practical matter this rarely happens.

So what are the benefits of coverage with a single company? As noted above, it can help avoid or diminish the likelihood of ugly cross claims between members of the same group. Also:

  • For groups with good claims histories, group purchasing of medical malpractice insurance can significantly reduce the cost per physician, showing group members an immediate and gratifying benefit of all the work that went into merging the practice.
  • There may be some members of the group who have had to pay high premiums or look to the high risk markets for coverage due to claims or other issues, who could now obtain coverage at closer to standard prices or from a standard medical professional liability company.
  • Many of the companies that insure large groups offer free on site risk management studies and can make recommendations to help lower future claims.
  • Large groups can secure coverage that best positions the group for future self insurance when the group becomes large enough to make this feasible.

The issue of reducing the cost of medical malpractice insurance is usually the main focus of a large group’s search. The key to reducing cost is to shop widely among standard and Excess & Surplus companies with a broker or brokers experienced in these markets. Standard companies, often called “admitted” companies are companies whose rates and forms are approved by the state. They are not allowed to charge rates other than those filed with and approved by the state or use policy forms that have not been filed with and approved by the state. Excess and Surplus companies, often called “Surplus Lines” or “Non Admitted” companies are approved by the state as meeting its solvency requirements, but do not have to file rates and forms with the state. Surplus Lines companies have much greater flexibility in negotiating rates and in creatively meeting emerging coverage issues that can often be faced by large medical groups and multispecialty medical practices. Our next posting will deal with Surplus Lines coverage in greater detail. Obviously, groups should only accept offers made by highly rated “admitted” and “non admitted” companies.

Companies have wide latitude in offering savings to large groups with excellent claim histories, Group savings of over 20% can be realized. Groups with poor claims experience will not see significant savings, making a key element of group formation proper credentialing and a key element of continuity, the establishment of a strong oversight committee to insure “best practices” within the group.

A side question of the search for group medical malpractice insurance coverage is whether it is better to work with a broker that charges a fee or one that is paid a commission by the insurance company. The argument for fee based representation is that it insures broker neutrality and levels the playing field for all companies. While many medical malpractice insurance brokers will represent their clients either on a fee or commission basis, the commission basis will usually get the group its best overall cost. This would not be true if determining the cost of malpractice insurance was an exact science. But it isn’t. Instead it’s a competitive marketplace and a good broker will obtain bids from many companies and negotiate hard to get the best price. Pulling the commission out before the negotiations does not guarantee a lower price to the group. Instead, the group can land up with the same price it would have had with an insurance company paying the commission, but now the group has to add its fee to that price.

Regarding physicians who have had claims activity, licensing board actions or the like, the severest treatment usually falls on solo practitioners or small groups, because the medical malpractice insurance company has little incentive to undertake a detailed review of the history of the past conduct and the steps taken to assure that they will not recur. Also, the premium does not outweigh the risk of future loss. In a large physician group setting, medical professional liability companies have a greater incentive to undertake this review and, are open to being convinced that there are good reasons to believe that these issues are in the past and can even help establish risk management procedures.

Many companies have risk management divisions. While it is not cost efficient to send a risk management team out to do a survey for a solo practitioner or small group, it does make sense to do it for large groups. When these services are available, they are almost always free and they tend to be excellent and well received.

The last benefit mentioned above is proper positioning for future self insurance. The medical malpractice insurance market in 2010 is highly competitive.  Rates are at a low point and will probably remain this way for another two to three years before the market cycles back to higher premiums. Under these circumstances, it is rarely beneficial for new groups to form new self insurance programs. The cost of buying insurance will usually be cheaper than the cost of funding a self insurance program. Many currently “Self-Insured” programs are paying higher “Self-Insured” costs, than the cost of purchasing medical professional liability policies from insurance companies. However, it is a good time to position a group for self insurance by assuring that the group’s coverage includes “incident trigger” (See posting dated November 5, 2009) language and considering products that convert from claims made coverage to occurrence coverage (See posting dated October 19, 2009).

All in all, current market trends favor large group medical practices and these groups should undertake a serious annual review of their medical malpractice insurance policies.

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With over 40 years since I passed the bar and in 30 years selling Medical Malpractice Insurance, few questions have been as difficult to answer as when it is appropriate to report a bad patient outcome to one’s Medical Professional Liability Insurance company.

The question is fraught with legal and  practical issues: legal because there is a contractual duty to report matters that can lead to claims; and practical, because reporting bad outcomes can affect one’s insurability and qualification for claims free discounts. The question of reporting is the same whether the insured is a physician, midwife, surgery center or other healthcare provider.  I will discuss the considerations below, but recommend that your read last month’s posting about demand and incident triggers because you will need to understand that topic to fully appreciate this one.

As discussed in last month’s posting, Medical Malpractice Insurance policies that have incident reporting triggers bind a company to defend any incidents reported to it during a policy term even if when the incident turns into a claim, the healthcare provider is insured with a different company.  This is true even if the new company provides retroactive coverage over the dates of service on which the claim is based.  On the other hand, demand trigger companies are not responsible for reported incidents until there has been a demand for money or a lawsuit has been filed.  With a demand trigger policy, if one has reported an incident, the insured cannot switch to a new company until the incident turns into a claim because any new company’s policy will exclude incidents reported to a previous Medical Malpractice Insurance company.  The company the insured wants to leave will not be responsible for any claims based on a previously reported incident if the healthcare provider is no longer its insured.  Thus, if an insured reports an incident to a demand trigger company and switches companies, he or she will not have coverage for that incident if it later turns into a claim.

Most Medical Professional Liability policies require the insured to report incidents that are reasonably expected to lead to claims, but there is rarely a definition of what is reasonable.  Also, there is a duty on the insured not to engage in conduct that prejudices the insurance company’s ability to defend a claim. Failure to give timely notice could be seen as prejudicing a company’s ability to gather up to date information needed to defend a claim.

The issue of when something is likely to lead to a claim is very subjective.  Perforations during colonoscopies, for example, are serious events, but can occur without any negligence and are usually repaired with a patient experiencing full recovery. We all know that bad things can happen during medical procedures.  It’s why informed consents include laundry lists of possible bad outcomes.  So is this an example of something that should be reported?  I don’t think so.  Unless the patient has made statements that lead a physician or involved surgery center to believe a suit will be filed or if there hasn’t been a quality recovery, a perforation is a clearly indicated risk for this procedure and if properly explained to the patient, can be reasonably viewed as not expected to lead to a claim.

Let’s look at another example, an OB/GYN or Midwife who has a patient who dies during delivery of a newborn.  Comparing this to the situation above, it may well be that this situation falls well within the parameters of an informed consent.  However, the outcome is so severe, that reasonableness argues for immediately reporting this outcome to one’s Medical Professional Liability insurance company.

Does a request for records impose a duty to report?  If a medical office routinely receives requests for records for things such as health and accident claims, a request for records may not impose a duty for one request that is any different than for other requests.  Healthcare providers are not required to recognize when a request for records comes from a malpractice insurance plaintiff’s law firm.  But if the request for records discloses that the records are being requested in connection with review of the healthcare provider’s performance for negligent conduct it may impose a duty to report.  There is a wide range of conduct between the examples given above that may or may not reasonably be expected to impose a duty to report and healthcare professionals have to use good judgment in evaluating the decision to report or not report bad outcomes.

Given the discussion above of the downside of failing to report bad outcomes, what is the downside of reporting every possible bad outcome?  Years ago, I worked with a surgeon who in over 25 years of practice had never been sued, but had reported every bad outcome, eighteen of them.  He was relocating to a new state where his current company did not provide insurance and was applying for new coverage.  No Medical Malpractice Insurance company in the standard market would insure him and he had to get coverage in the “high risk” market.  Similar considerations can arise in “claims dumping” situations where a physician, midwife, surgery center or other healthcare provider switches companies and is advised by the agent or new company to check past medical records and report every bad outcome to the incident trigger insurance company the insured is leaving.  Sounds like a good idea, but it can come back and bite you if a future switch in companies is needed since almost all applications for new coverage ask about incidents that have been reported to previous companies.

Also, many insureds are concerned that reporting claims can affect claims free discounts. This is a real concern, although some companies give claims free discounts to insureds with open incidents. Lastly, if one is insured by a demand trigger policy, reporting a case doesn’t make the company responsible to defend it until it turns into a claim.  Reporting this incident will exclude any future claims on this incident from coverage by any other company an insured may want to switch to so reporting incidents can affect one’s ability to switch companies.  But not reporting incidents to avoid this concern usually will not help.  Many policies exclude coverage for incidents that an applicant for a new policy knew about or could reasonably have foreseen would turn into a claim.  Therefore, electing not to report an incident to a current demand trigger company may not offer protection to an insured who leaves a demand trigger company.

Seeking advice on whether to report bad outcomes is one situation where calling your insurance agent may not be helpful.  Insurance agents have to advise any client that asks whether an incident should be reported, to report it.  This is so because insurance agents also can be sued for negligence, just like the professionals they serve.  If an agent advises against reporting an incident and that incident later turns into a claim which the insurance company refuses to cover because of either a gap in coverage, prejudice by a delay in reporting or for some other reason, the agent who gave the advice not to report may be found to have been negligent in giving that advice.  For this reason, if an insured calls an agent and asks, the agent has to assume that the incident concerned the insured enough to seek advice and, therefore, should be reported.

I recognize that of the blogs I have posted, and all the ones I will post in the future, this one is likely to be the least helpful in making decisions of which incidents to report and which can wait, but I hope that the discussion of the legal and practical implications help readers in thinking through the process to reach reasonable decisions.  As with all such legal matters, this posting is general in nature and cannot be relied upon for legal advice.  Those who need legal advice for a particular issue should consult with their personal attorneys.

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A medical malpractice insurance policy is a contract. The terms of the contract, what is covered and what is excluded, can vary from company to company and even among different policies issued by the same company.

Nothing demonstrates that more clearly than demand and incident triggers. In our last post, we discussed the differences between claims made and occurrence policies. An insured can move from one claims made company to another, with each subsequent company picking up the retroactive dates of previous companies. Any new claims, even those that occurred while insured by a previous company, are reported to the company whose policy is in force at the time the claim is made. However, claims made companies do not intend to provide coverage for known claims that occurred under a previous carrier. The retroactive coverage is there to cover new claims that were unforeseeable at the time the insured switched carriers.

All claims made policies exclude coverage for incidents that were reported to previous insurance companies. Some have exclusions for bad outcomes that an insured “should have” reported to a previous medical malpractice insurance company. Because of this exclusion, physicians, allied practitioners, and surgery centers that have had bad outcomes or have reported incidents have to be certain that any lawsuits that arise from those incidents are covered by either the old or new insurance company. This is how demand and incident triggers come into play.

When a medical professional liability insurance company issues a policy that has an incident trigger, any incident reported to it remains its responsibility even if the insured switches to another company. With an incident trigger, the insured can report a bad outcome the day it happens, even if there has been no threat of a lawsuit, and know that the company to which the incident was reported will always be responsible for any future claims based on this incident. If an insured cancels that policy, a tail does not need to be purchased from that company for the claim to be covered.

When a medical malpractice insurance company issues a policy that has a demand trigger, insurance company responsibility for an incident cannot be triggered until a patient has made a demand for money or filed a lawsuit. With a demand trigger policy, an insured with a bad outcome that was reported to an insurance company, who thereafter switches to another company before a claim is made, is likely to find that any suit based on this bad outcome is not covered by either the old or new insurance company. It is not covered by the old insurance company because the insured is no longer covered by it and responsibility for this incident was not triggered before the insured switched companies. It is not covered by the second company, because its policy excludes any incident that was or should have been reported to a previous company. Clearly, those insured by demand trigger policies have to exercise great care in switching companies.

There are hybrid versions of these two policy forms: policies that are incident trigger within a short window (30-60 days) after medical services were rendered, and demand trigger after that time; and, policies that are similar to demand trigger policies but are a little more liberal in defining what triggers coverage (e.g. a lawyer’s request for records).

Whenever a physician, entity, or allied practitioner has a choice (in some markets there may be no choice) between a demand and incident trigger policy, the incident trigger should be taken, no matter what the difference in price. That might sound like a huge generalization but it isn’t. Demand trigger policies can force insureds with even a single dormant incident to stay with that company for years, to avoid a gap in coverage. Anyone who is forced to stay with an insurance company because of an open incident may have to wait 3-5 years for the Statute of Limitations to pass (longer if children are treated) before he or she can consider switching companies. During that time, the insured can be subjected to significant premium increases and even changes of coverage. And even the passing of the Statute of Limitations is not a complete guarantee against future claims because, under certain circumstances, the Statute of Limitations can be breached, and it can cost considerable legal fees to invoke the Statute and beat back any challenges to it. The only way a change can be made to another company with certainty that a reported incident is covered is by purchasing a tail from that demand trigger company. That can be very expensive. In some cases, particularly for “high risk” policies, long-term tails may not be available. Hence the blanket recommendation that demand trigger policies should be avoided at all cost unless there is no other viable choice.

In our next post, we will discuss reporting bad outcomes to insurance companies. Should all bad outcomes be reported? Should bad outcomes never be reported until a letter has been received from a patient’s lawyer? Stay tuned. We welcome questions on our topics and suggestions for topics you would like to discuss.

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“In the olden days” all Medical Malpractice Insurance policies were “occurrence” policies.  Policies were written for a one-year term and covered any claims that arose from treatment during that one-year term even, if at the time the claim was made, the insured was no longer with that company.

This ended in the 1970′s because Medical Professional Liability companies (particularly St. Paul Insurance Company) were writing policies with premiums based on claims histories of the 1960′s and 1970′s and paying out claims years later based on burgeoning jury awards.  The premiums they had charged when the policies were issued did not cover the losses at the levels that were paid years later when the claims were resolved.  The country’s largest writer of physicians’ liability insurance, St Paul, did not have a quick fix and withdrew from the market entirely, creating a medical malpractice insurance crisis.

Smaller regional carriers were formed to close the gap.  St. Paul later reentered the market and, long story short, Medical Malpractice markets shifted to claims made coverage, which allowed companies to later adjust their pricing to meet new concerns by having a “last shot” at more premiums through the need for “tail” insurance.  A claims made policy is an incomplete policy form that offers coverage from a start date (called a “retroactive date”) through subsequent renewals, as long as the insured keeps paying premiums or if the insured switches companies, as long as the new company picks up the original retroactive date, and the insured keeps paying premiums.  If, however, the insured stops paying premiums or switches companies without the new company picking up the previous retroactive date, coverage for previous acts (“prior act coverage”) ceases unless that coverage is completed by acquiring a “tail”.  With most policies offered to physicians in the standard market, a free tail is available for death or disability without any waiting period and for retirement usually after a waiting period of one to five years and sometimes after reaching a minimum retirement age.  Free tails are usually not available to facilities and the tails that are available are usually offered at a steep premium and extend the time for filing claims for only one to ten years (usually 1-5 years).

It would seem almost intuitive that the best available medical malpractice policy is the occurrence policy and that would be true if we don’t consider the price.  Occurrence policies are priced at a level premium year to year.  Claims made policies start off at a low first-year premium and increase each year, usually until the fifth year, when they reached their “mature” level premium.  The savings in premium over those five years can equal approximately 125%-170% of the mature premium so with claims made coverage, you get a year and a quarter or more of coverage free, compared to occurrence coverage and that is true unless you get stuck having to pay for a tail which can cost anywhere from about 180% to 250% of the mature fifth-year premium.

There are other considerations, such as whether the claims made Medical Malpractice Insurance policy has a “demand” or “incident” trigger, but those issues will be discussed in our next blog post.  All other things being equal, the choice between claims made and occurrence coverage depends largely on whether an insured will qualify for a free tail.  If a free tail is likely, claims made is usually the way to go.  Let’s look at a real case example for a Maryland Radiologist with a company that offers claims made and occurrence coverages.  The chart below shows this company’s annual premium for limits of $1,000,000/$3,000,000 for claims made (I) and occurrence (II) policies, the cumulative savings of claims made over occurrence (III), what the tail cost would be at the end of each year (IV) and the cumulative price difference if a tail is purchased at the end of that year (V).  Remember, you only pay a tail once for any number of years of claims made coverage.

Year

I

Occurrence

II

Claims Made

III Cumulative Savings

IV

Cost of tail this year

Extra cost if a tail is purchased

1

$17,645

$5,379

$12,266

$17,693

$5,427

2

$17,645

$10,084

$19,827

$26,539

$6,712

3

$17,645

$13,615

$23,857

$32,068

$8,211

4

$17,645

$15,127

$26,375

$35,386

$9,011

5

$17,645

$16,587

$27,433

$35,386

$7,953

6

$17,645

$16,587

$28,491

$35,386

$6,895

7

$17,645

$16,587

$29,549

$35,386

$5,837

8

$17,645

$16,587

$30,607

$35,386

$4,779

9

$17,645

$16,587

$31,665

$35,386

$3,721

10

$17,645

$16,587

$32,723

$35,386

$2,663

Different companies may have higher or lower first four year premiums and tail factors.  A qualified Medical Malpractice Insurance Broker can do these comparisons for any companies you are considering.

As can be seen from the chart above, in the first five years, this Radiologist would save $27,433 on claims made premiums and, if a tail needs to be purchased, the extra cost over the claims made savings would be $7,953.  After ten years, the claims made savings is $32,723 and, if a tail needs to be purchased, the extra cost over the claims made savings would be $2,663.  The claims made savings to this Radiologist, if a tail is not needed because of qualification for a free death, disability or retirement tail increases each year by $1,058.

Of course, this does not take into account the additional dollars that accrue from investing the savings.  Nor does it consider the shock value of having to come out of pocket at one time with a lump sum payment of as much as $35,386, if a tail has to be purchased (or approximately $180,000 for a Maryland OB).

So how do we select which medical malpractice policy form to take?  Surgery Centers and Ambulatory Care Centers should always opt for occurrence coverage unless they need the savings of the first few years of lower premiums to operate, because there ordinarily are no free tails for facilities and tails are always based on current premiums.  If rates are dropping so will the tail cost but one never knows.  A tail could be needed because the facility is closing, or has lost its coverage due to claims or market conditions and may be unable to get retroactive coverage from a new carrier.  In those cases the tail can be expensive and may be limited.  So I recommend that facilities go with occurrence coverage if it is available.  Physicians and Allied Practitioners who know they are going to work at a location for a short time and will not be able to take coverage with them are better off with occurrence.  Physicians and Allied Practitioners who plan to stay at one location for a long time, and can bank the savings against unexpected needs to purchase a tail, are better off with claims made coverage and its significant savings over occurrence coverage.

Stay tuned for a discussion on “demand” and “incident” triggers in claims made Medical Malpractice Insurance policies, an important consideration in reviewing competitive offerings.

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Physicians often are Medical Directors of surgery centers, nursing homes, hospital divisions and the like.  Sometimes these positions come with a small stipend.  Sometimes they are attractive because the title is prestigious.  However, with the small stipend and prestige come significant exposures to liabilities that often are not covered by physician medical malpractice insurance policies.

Physicians that are Medical Directors at hospitals are involved in credentialing and establishing practice protocols.  At surgery centers and nursing homes, Medical Directors can have responsibilities for patient care, credentialing, setting protocols and the hiring and firing of ancillaries.  Even if those responsibilities are not specifically enumerated in the agreement between the physician and the institution, they may be implied from the “Medical Director” title.  The Medical Director can be exposed to potential claims from disgruntled patients, employees and even their employers.

Credentialing, while not a professional liability exposure is covered by most physician medical malpractice insurance policies.  Patient care is usually covered unless there is a specific exclusion.  Setting protocols, hiring and firing are not medical professional liability exposures and ordinarily are not covered.

In a recent lawsuit, a surgical group with its own, separately incorporated outpatient surgery center, had an adverse outcome.  One of the group’s members, who was not involved in this patient’s care, but was the Medical Director of the corporation, was named in the lawsuit solely in his capacity as Medical Director.  The physician/Medical Director’s professional liability insurance company declined coverage because it contended the Medical Director position was not covered by its policy.  The case including the Medical Director’s liability was settled for $4,000,000.  So how does one protect against Medical Director exposures?  The simple answer is not to accept any such titles.  Unfortunately, that is not always possible or even desirable.  Some states require that certain facilities have “Medical Directors.”  A surgery center, like the one mentioned above, may be required to have a Medical Director and the physicians are not going to search outside the group to fill this position.  Also, many physicians desire the prestige or compensation that comes with the title.  For those who cannot or do not want to refuse the title, they must assure that this exposure is covered either by a malpractice insurance policy that includes protection for these exposures or a “Directors and Officers” policy.

Physicians should fully disclose all Medical Director positions to the company that provides their medical malpractice insurance coverage and secure a written determination from the company as to whether these positions are covered for services that involve both patient and nonpatient care.  Ordinarily the malpractice insurance company will cover the patient services but will exclude the Medical Director services.  If these services are excluded, one may be able to negotiate with the company to have this coverage added, preferably for free, but if not, possibly at an additional premium.  The larger the insured medical group, the more likely that this can be added to the existing policy at little or no extra cost.

It is best to have the Medical Director exposure covered within one’s own medical malpractice policy because this reduces the likelihood of gaps in coverage that can occur when more than one policy provides coverage.  If coverage cannot be secured through one’s own malpractice insurance policy, one should seek out the coverage either through a policy provided by the entity for which he or she is Medical Director or through a personal Directors and Officers policy.

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We are pleased to announce our new blog, discussing contemporary medical malpractice insurance issues.  We hope to post articles to this blog monthly or more often as time allows and will consider issues presented by our readers.  The blog will focus on physician, midwife and surgery center malpractice insurance issues, but more often than not, the discussions will be equally relevant to other medical professionals and entities.

This blog, written by Israel Teitelbaum, Attorney at Law and president of Contemporary Insurance Services, is intended to provide an overview of medical professional liability issues and is not intended to provide legal advice to any party.  It should not be relied upon for that purpose.  Those who need specific legal advice for a particular issue should consult with their personal attorneys.

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