Malpractice insurance terminology is often daunting, even for seasoned medical professionals. If you’ve ever wished for a cheat sheet to help you parse a medical malpractice insurance policy, you’re in luck. Here we discuss common terms, red flags and types of malpractice policies to help you make informed decisions about your coverage options.
Does the Policy Do What You Need It to Do?
When evaluating policies, the first step is to figure out what type of insurance and limitations each policy offers. In medical malpractice insurance, there are two basic types of coverage: claims-made and occurrence. (Tail coverage sometimes also comes into play, but we’ll get to that later.) You also need to determine what kinds of claims the policy covers, how much coverage it grants, whether there are penalties for excessive claims and the time period during which the policy remains in effect.
Claims-Made Policies Are the Most Common
There’s a very good chance that the policy you’re considering is a claims-made policy, so let’s highlight what you need to look for in this kind of coverage. The most important thing to know about a claims-made policy is that coverage does not extend past the life of the policy. Be on the lookout for verbiage that limits the insurer’s liability after the policy expires. What does this mean in practice? If you maintain a claims-made policy for three years, and a patient files a claim years later for an incident that occurred during that three-year period, the policy does not cover the claim. The benefit to this kind of policy is that it’s considerably less expensive than an occurrence policy, especially in the early years, when the odds of claim filings are low. The cost of the premiums ramps up as the policy ages.
Occurrence Policies Have Your Back
Are you holding an occurrence policy? Again, read the policy carefully to learn what happens when the policy expires. Occurrence policies are generally more expensive than claims-made policies, but there’s a very good reason for this. An occurrence policy covers all incidents that happened during the covered period, regardless of when the patient actually files. This is valuable because many patients don’t file claims until years after the incident. To further complicate things, once patients file, several years may elapse between the date of filing and an insurance settlement. An occurrence policy grants peace of mind when you are uncertain whether claims might surface at some point in the future.
Bridge the Gap With Tail Coverage
If you’re holding a claims-made policy, you probably should consider tail coverage, which bridges the gap between policies when you change insurers or make policy alterations that cause a temporary lapse in coverage. Tail policies are expensive, but skipping this extra coverage means potential liability if a claim relating to the original policy’s coverage period comes in after the fact.
What Else Do You Need to Look For?
As always when looking at legal documents, pay close attention to the details. Does this policy cover an entire practice? If so, is coverage pooled among the group or divided? What about locum tenens coverage — are temporary employees afforded the same coverage as principals? Don’t forget about the nature of the claims. Familiarize yourself with the types of incidents the policy covers, and make sure that the coverage is adequate for the scope of your practice and your specialty. Are there state laws that cap medical awards? All these factors affect how much coverage you need to buy. Is the policy assessable? That’s a provision that permits the insurer to tack on a hefty fee if its losses are too great. Does the policy have a content-to-settle clause? Make sure that the policy does not permit the insurer to settle a claim without you signing off on it.
Medical malpractice insurance is as complex as your practice. It’s difficult to address all the potential issues that arise with coverage when a claim comes in, but a few precautions can help you be prepared and stay informed. Take your time reading through your policy. Don’t assume that paying a premium is enough to look after your legal interests. Familiarize yourself with any terms in the policy that you don’t recognize, and don’t sign anything until you understand it clearly. If you’re new to a group practice and have policy options, carefully consider the kind of coverage you need, both short term and long term. Don’t be afraid to get opinions from an industry professional to help you make the best decisions.