An Introduction to Medical Malpractice Insurance

It's common knowledge that litigation has exploded over the past few years. This is particularly true with respect to malpractice suits against licensed professionals. This category of risk generally applies to: ·
Doctors Nurses Other medical practitioners Hospitals
What Is Medical Malpractice?
Medical malpractice occurs where a medical practitioner acts in a negligent manner when treating a medical condition. Malpractice can occur from an action taken by the medical practitioner, or by the failure to take a medically appropriate action. Examples of medical malpractice include:
Failure to diagnose, or misdiagnosis of a disease or medical condition; Failure to provide appropriate treatment for a medical condition; Unreasonable delay in treating a diagnosed medical condition; Failure due to faulty equipments, negligence in maintenance of the hospital facility or non-conformance to standards also result in medical malpractice.
To prove a medical malpractice claim, the patient must prove the health care provider did not comply with an acceptable and reasonable standard of medical care in their specialty, and that this failure was the cause of the patient's harm.
When a medical malpractice claim is placed, there need to be four basic elements for a successful claim and compensation. The patient needs to show that a duty was owed when the hospital took on the patient. Next, they must show that the duty was performed incorrectly and there were obvious errors. They should show that this breach in duty caused an injury and damages (which can be emotional) for which the hospital, physician or practice must pay financial compensation. The majority of medical malpractice claims are due to medical error and 73% of these settle for compensation
How to Choose Medical Malpractice Insurance
Medical malpractice insurance falls into three categories: claims-made, occurrence and claims-paid coverage. The most common type of policy is claims-made coverage.
Claims-Made Coverage
Claims-made policies cover policyholders for alleged acts of malpractice that take place and are reported to the carrier during the policy period. Claims-made policy premiums are relatively low for the first few years due to the fact that there is often a significant lag between when a treatment is administered and the filing of a claim resulting from that treatment. Because of this, claims-made premiums are structured to increase each year
that the coverage is in continuous force until the risk presented approximates a "mature" risk. This is usually in years 5, 6, or 7 for individual physicians.
As a result, one advantage of claims-made coverage is that premiums are based on actual past and current experience. Policyholders therefore do not pay premiums for future liability that is difficult to project.
Another advantage of claims-made coverage is that it enables physicians to increase liability limits when necessary. For example, the limits of liability in effect at a policy's inception may not be enough to cover a settlement incurred today. In this case, the physician may wish to increase his or her limits of liability. Claims-made policies only cover claims reported, and arising from, incidents that occurred while that policy is in effect, policyholders must be wary when switching carriers or otherwise terminating coverage.
For Example, assume you purchase a claims-made policy with an effective date of 7/1/2003. Assume you hold this policy with no interruption in coverage for 10 years. In 2013, you submit a claim for an event that occurred in 2004. The policy in force in 2013 will respond, meaning that you will be covered up to the full limits of the 2013 policy.
Occurrence Coverage
An occurrence policy insures for any incident that occurs while the policy is in effect, regardless of when a claim is filed. Under an occurrence policy, insureds pay premiums that take into account not current experience, but future projections as well. Such claims are called "incurred but not reported" (IBNR). Occurrence insurance rates can vary significantly because of the difficulty in projecting future claims expenses. Under an occurrence policy, the limits of liability are those in effect when the incident occurred.
The advantage of an occurrence policy is that neither retroactive (prior acts) nor tail coverage is needed when terminating coverage.
Tail Coverage
Tail coverage is offered when the physician is terminated from the current policy due to retirement, change in employment, disability, etc. Every physician has a retroactive date within the policy. The retroactive date indicates the physician's entry date in the policy. Claims will be entertained for any losses that occur during the retroactive date and end date of the policy that is active as of the reporting date of claim. Tail coverage ensures that the reporting period of the policy continues even after the expiry of the policy or termination of the physician from the policy. Tail coverage is also known as Reporting Endorsement Coverage.
Every Physician has separate limits within the policy. If the physician is covered for their individual limit and opts to get covered for Tail coverage, then either the physician continues with the same limits or opts for lower limits. If the physician opts for lower limits there would be a discount that the physician can benefit on the tail premium. Any claim registered hence forth on the policy will only be valid for the reduced limits. Physician can opt for tail coverage within 30 days from the expiry of the policy or the termination date of the physician.
Premiums for tail coverage are determined by a doctor's specialty, territory, limits of liability and length of continuous claims-made coverage. Tail coverage gets more expensive the further back in time it must provide coverage since the liability assumed by the carrier becomes greater. It is usually a percentage of the insured's prior years premium.
Prior Acts ("Nose") Coverage
Prior acts coverage provides similar protection as reporting endorsement coverage. However, unlike a "tail," nose coverage is purchased through the new insurer.
Claims-Paid Coverage
Claims-paid coverage is often used by Trusts. Under a claims-paid policy, premiums are based only on claims settled during the previous year and projected for the current year. Claims-paid policies are generally assessable for a number of years after the policy has been terminated. In addition, claims-paid policies usually have restrictive claims "triggers," under which a claim is not considered formally made until a "Summons and Complaint" is received. As a result, policyholders changing from claims-paid coverage to claims-made coverage might find it difficult to obtain retroactive (prior acts) coverage from the new carrier. Physicians leaving a claims-paid carrier will most likely have to purchase expensive tail coverage from that claims-paid carrier.
Common Exclusions
o Contractual Liability
o Clinical Trials however Research Projects may be covered, the insurer will require information on these.
o Genetic damage or manipulation
o IVF treatment
o Dishonest, Fraudulent, Malicious or Illegal acts or omissions.
Risk Management & Assessment
Implementing a risk management program can help improve patient care, prevent malpractice claims and reduce costs. Physician-led research shows "risk appears related to patients' dissatisfaction with their physicians' ability to establish rapport, provide access, administer care and treatment consistent with expectations, and communicate effectively."
Insurance Company offers risk management courses to its insured. Similarly they also conducts risk management seminars periodically. By attending these seminars the physicians are eligible for risk management credits in the renewal. A Risk Assessment can be requested by the Underwriting or Risk Management Departments, Claims Committee or an insured.