Considering discontinuing your physician malpractice insurance policy? You might want to think again. Many physicians do not understand the basics of a claims-made medical malpractice insurance policy and are in danger of leaving themselves exposed by not having a thorough understanding of how the policy works. A claims-made policy is different than an occurrence policy in that it only covers a physician or surgeon, while the policy is in force. An occurrence policy covers the physicians even after they cancel the policy however costs significantly more than a claims-made policy.
Cancelling a Claims-Made Medical Malpractice Insurance Policy Leaves Physicians Exposed
This is a very important point as many physicians think they only need to have medical malpractice insurance coverage in force while they are practicing. Many physicians today are employed physicians with a group or small office and are required to carry their own liability insurance. Often when a physician leaves a group or small physician office, they are under the incorrect assumption that they can simply cancel their policy until they find employment again. Medical professional liability insurance is not like auto insurance. If a person is going to have a period of time where they don’t have a car and will not be driving, they do not need to have auto coverage in place. Claims-made insurance policies however are different in that they only cover a physician while the policy is in force.
Since a physician or surgeon can be sued for a medical malpractice claim many months or years after they saw a patient or gave medical treatment, they must have a policy in force at the time they receive the claim; not just at the time that they say the patient. Each medical malpractice insurance claims-made policy has a retro active date listed on the policy declarations page. The retro active date signifies how far back into the past the policy covers for a physician or surgeons medical acts. Therefore a physician can receive a claim today for something they did five years ago. As long as their medical malpractice insurance declarations page shows the retro active date going back at least five years, and that claims-made policy is currently in force, the physician will be covered for the claim.
The Importance of Prior Acts Coverage
The importance of prior acts coverage is obvious. As a physician, you never know when you are going to be sued. A common misconception is that after a couple of years there is no more liability as the statute of limitations will have run its course. Each state has its own laws on statute of limitations. Most states have a statute of limitation of two years from time of discovery. The “from time of discovery” part is very important. That means the patient has two years to file a medical malpractice claim from the time they discover the medical mistake. In addition the statute of limitations for minors, in most states, does not start until the patient reaches eighteen. Theoretically, a minor has twenty-one years to file a medical malpractice claim against a physician. One can see why it is most important for Ob/Gyn’s and pediatric physicians to have all of their prior acts covered going back to the first date they started seeing patients.
Another critical point that physicians must understand is that once they cancel their coverage and don’t have a policy, they cannot simply get a policy in place “down the road” and have their prior acts covered again. Once they drop their medical malpractice insurance policy, they will no longer ever be able to get prior acts coverage in place. This leaves physicians completely exposed should they receive a medical malpractice claim. The reason that medical professional liability insurance carriers will NOT cover a physician’s prior acts that has a bare period is because this would allow physicians to go bare and then get coverage for their prior acts if they think they are going to receive a claim or if they had a bad outcome. Medical professional liability insurance companies are willing to cover a physicians prior acts as long as they have had continuous coverage.
The Importance of Keeping Your Claims Made Policy in Force
Once a physician has a bare period, they will have a much more difficult time getting coverage in place. In addition the cost will be much higher. Admitted medical malpractice insurance carriers tend to be much more competitively priced in the market place. Admitted carriers will NOT cover a physician who is currently bare and looking for coverage. Not only will they not cover the prior acts, they won’t cover the physician going forward either. Most admitted carriers see going bare as an irresponsible action and therefore do not want to cover that physician.
Fortunately there is a Market for Physicians in This Dilemma & it is Called the Excess & Surplus Lines Market
The E&S market is available for physicians who cannot get coverage with an admitted carrier. Most often they cover physicians who have had excessive claims, medical board issues or drug issues. They are willing to offer medical malpractice insurance to physicians who are currently bare or have a bare period in the past however they will NOT cover the physician’s prior acts. They will only cover the physician’s acts going forward.
Most often physicians find themselves in this dilemma when they are employed full-time at a hospital, university or large medical group and have their own medical malpractice insurance claims-made policy in force for some part-time work they do on the side. Once they opportunity for the part-time work ceases to exists or they do not wish to continue that part-time work, they are limited to two options. One, they can continue paying for the policy on a part-time basis until they find different part-time work, or they may purchase a tail policy.
The Unattractive Purchase of a Tail Policy
A tail policy is a one-time payment that the physician can pay to their medical professional liability insurance carrier, and they are covered permanently for their prior acts (most carriers offer permanent tail policies, however it is important to check with your carrier when purchasing a tail policy). Purchasing a tail policy is not an attractive option as it typically costs 200% of your current premium and there are no financing options available for tail policies. Physicians also don’t like the idea of continuing to pay for a policy that they are “not using”. They must remember that they ARE “using” the policy to cover their prior acts.
The Final Word
By allowing your claims-made medical malpractice insurance policy to lapse, it then leads to the physician being bare and completely exposed. Therefore, the physician needs to personally cover the extraordinary costs of hiring a lawyer and defending a medical malpractice claim themselves. It also leads to higher future premium costs and coverage in the E&S market. Continuing to pay for your physician malpractice insurance policy, while in transition, is a good thing and will keep a physician covered properly today and in the future.