Professional liability insurance is important to physicians for a variety of reasons. Its primary purpose is to fund the costs of defending claims alleging professional negligence and to fund the payment of any loss determined by settlement or judgment. Physicians practicing in Michigan are not required by state law to carry professional liability insurance. However, in practice, physicians are generally required to carry professional liability insurance as a condition of the privileges of medical personnel in hospitals and other facilities and to enter into contracts with health insurance schemes.
To understand and limit potential risk exposure, physicians should familiarize themselves with the terms of their professional liability insurance policy, particularly if such insurance is carried on their behalf by a hospital or other organization. This article summarizes some of the key elements of a professional liability policy that physicians need to understand.
Type of Professional Liability Insurance Policy
There are two types of professional liability insurance policies: an “event-based” policy and a “claims-based” policy. An occurrence insurance policy generally covers an alleged act or omission of professional negligence that is supposed to “occur” during the policy period, even if the claim is brought against the doctor and/or reported to the insurer. after the end of the insurance period. Under a claims-based policy, the alleged act or omission must occur within a time period defined in the policy, and the claim must be claimed and reported during the policy period or within a defined time period. after the end of the policy period in order to obtain coverage under the policy.
Liability coverage limits
Insurance policies generally impose liability coverage limits for each claim made against a physician during the policy period (usually 1 year), as well as the total liability coverage limit for the policy period ( also called “annual aggregate”). Each period of insurance generally has its own limits of liability per loss and in the annual total. It is important for a physician to understand a policy’s liability limits per claim and in the annual aggregate to assess the physician’s potential exposure to risk in the event that one or more claims result in losses exceeding the liability limits. available. It is important to note that attorneys’ fees and other defense costs do not normally erode (i.e. reduce) the per-loss and annual liability limits provided by physicians’ professional liability policies. .
Applicable Coverage Dates
Physicians should know the applicable insurance period and the start and end dates of that insurance period. Additionally, physicians should understand whether the policy provides coverage for dates of service that extend before or after the policy period. For example, a claims-based policy will sometimes set a “retroactive date”, which is usually a date occurring before the start of the policy period, sometimes referred to as “nose cover”. Where a retroactive date is provided for in a policy, the policy will cover claims alleging acts or omissions which occur on or after the retroactive date and until the end of the policy period, assuming that the complaint is reported in a timely manner. Similarly, policies written on the basis of claims generally allow physicians to purchase, upon payment of an additional premium, an extended claim endorsement – commonly referred to as “full coverage” – to insure claims that are asserted after the end of the insurance period but who allege claims based on acts or omissions occurring during the insurance period (including from any retroactive date prior to the insurance period, if any, until at the end of the insurance period). Some insurers offer claims-modified policies that can provide additional coverage without additional premium payment upon specified events, such as a physician’s retirement from the practice of medicine.
Scope of coverage and exclusions
When a professional liability claim is made against the physician, the claim must be covered by the coverage provided by the policy for the claim to be insured. To be within the scope of coverage, a claim must generally allege professional negligence in connection with the provision of professional services. Some professional liability policies may also provide legal defense coverage for licensing investigations and enforcement actions by state or federal agencies. Physicians should review their professional liability policies to determine the types of claims that may be covered. In addition, physicians should understand any exclusions that may prevent coverage of a claim, such as failure to meet the terms and conditions of the policy (e.g., on or after the dates covered by the policy, or if the claim alleges facts that are specifically excluded from coverage (for example, sexual abuse during the provision of professional services).
Physicians should periodically review their malpractice insurance policies with their insurance agents to ensure that they understand the adequacy of their available coverage limits, extent of coverage, exclusions, necessity and potential cost of an insurance cue, and whether or not the doctor has the right to consent to settlement by the insurer and the consequences thereof. A physician’s malpractice insurance needs may vary depending on the physician’s specialty and practice structure. Likewise, physicians who rely on a hospital or other organization to provide professional liability insurance should request a copy of the policy to ensure that they understand the available coverage offered to the physician and the limits of coverage.
*This article originally appeared in the first quarter 2022 edition of the Detroit Medical News.