Know the Types of Policies Available
Medical Malpractice Professional Liability Insurance comes in two basic forms: Occurrence or Claims-Made. In today’s insurance market, the overwhelming majority of policies available are claims-made, but some companies do offer occurrence policies.
Claims-made insurance provides coverage only for incidents that occurred and were reported while you are insured with that carrier. Thus, both the incident and the filing of the claim must happen while the policy is in effect.
If you drop a claims-made policy, you are not covered for any suits filed later unless you pay for what is known as “tail coverage,” the term used for an extended reporting endorsement. Tail coverage is expensive—often three times the amount of an annual premium—but it’s essential to be insured for any claims that could arise later.
Occurrence coverage provides lifetime coverage for incidents that occurred while the policy was in effect, regardless of when the claim is filed. Thus, if you have an occurrence-type policy in effect for the calendar year 2007, and a patient files a claim in 2010 for an incident that happened during 2007, the policy covers you for that claim, even if you no longer have insurance with that carrier.
Claims-made policies are generally cheaper than occurrence policies for the first few years of coverage because the potential for claims builds slowly as policy years accumulate. The premium then increases each year for a period such as 3 to 5 years until it reaches the “mature” rate. In comparing costs of malpractice insurance policies, be sure to ask how much the premium will increase after the first year.
Physicians should understand clearly whether their insurance is assessable – whether the insurance entity has the right to “assess a surcharge” if losses are excessive. “Many risk retention groups and captives, and ALL trusts are assessable.
In the malpractice crisis between 2001 and 2004, there were a number of companies that were forced to come back and assess their members premiums that the Doctors were contractually obligated to pay long after their policies expired & regardless of their own individual loss history
Defense Costs - Within or Outside coverage Limits
Check on your policy’s coverage of defense costs, which are the expenses involved in defending and processing a suit, (not the amount of the award or settlement). Defense costs include the fees of the defense attorney retained by the insurance company, the fees of expert witnesses, court reporters’ fees, and clerical expenses. Some policies put a limit on the amount the insurance company will pay. If your policy does cap the amount of defense costs it will pay, be sure the overall policy limit is high enough to cover defense costs in addition to a settlement or judgment amount. Defense Costs “Outside” the limits of liability is preferred & should be obtained whenever possible where policy limits are not eroded as a result of defense related costs & expenses.