Insurance: Your Defender, With Wrinkles

It is an amazing fact that at courses on Malpractice, a substantial percentage of physicians raise their hands to indicate they have not read their policies. And this is only the first step. Have you? And do you have it to refer to? But even more importantly, learn how this different world that protects you works. Because you have to be protected in advance. Here are some key issues to check.

1) Your insurer is your main defense, but not your entire defense. Moreover, some problems that come with malpractice cases are not under their protection and can be substantial issues for you. They often require separate attorneys you pay for. They can cause substantial loses of time, money, and piece of mind for you and your family. As with other insurance, you are better off prepared although you work not to need the protection.

2) Claims Made vs. Occurrence. A claims made policy covers your for each claim, and must be in force when that claim is filed, even if the event was years earlier. Thus if you stop practicing or move to a new area, you have to continue the insurance, called a tail. This adds extra cost later. On the other hand you can get a policy for each occurrence event, that must be in force only when the alleged malpractice occurred. This does not need a tail policy but it usually costs more. It is likely your insurance is from your employer, since about half the physicians in the US are employed. But is it not less important to know your policy and its implications. What it wisest in a group purchase may not be wise for you. And be sure that if you were to leave you know how that affects you. If they have claims made policy you will likely need either a tail coverage, or a prior-acts policy. You should try to negotiate this coverage with your new employer. Pay careful attention to the statute of limitations in the state you are in, becuase you only need the additional coverage as long as that lass.

3) Amount of Coverage. There is a philosophy that your coverage should be at or above what is common in your area, or above that of the vast majority of awards there. This may not be hard to do in a low malpractice rate state, but can be a significant problem in high rate states. It is common to have limits of $1,000,000 per occurrence with a $3,000,000 per year maximum. On the other hand, some worry that the more coverage they have the more attractive they are to the plantiff. The other extreme is to have little or no coverage, and have a sophisticated asset attorney protect you. This is an individual decision, but be thorough and knowledgeable about any method you use. It takes far less time to be thorough up front.

4) Questions about your limits. What happens if you exceed your malpractice limit, the aggregate? This is an important question with a two part answer. First, it is rare that a physician's personal assets are gone after. But it can happen. What may be more of a concern is that an award that exceeds the aggregate may leave you with extended negotiations, costs, and uncertainty while the matter is resolved. Also, should such an award occur it is usually the plaintiff, your patient, who makes the decision to tell the collection agency how far to go. Your patient's idea of what is worth going after may be much different than yours, or the plaintiff's attorney.
Here are important questions to check in your policy that are not obvious
      a) Are defense monies covered if the aggregate is breached? For cost control reasons, some insurance policies will not cover your defense if the aggregate has been exceeded. So if you had 2 or 3 cases pending, and you go over the aggregate in awards, you will have to pay your own defense costs. This is a particular problem, because it is improbable another insurer will pick you up for an already existing case. The cost of defending a case is often in the $100,000 range, but of course this can vary substantially. If this has happened, you may be able to appeal to the company, or to the state regulators, but be careful to detemine how your coverage works now.
      b) Is there an umbrella policy, do you participate, do you have the policy? What are the notification rules to qualify? An umbrella policy is an extra layer of coverage. It is often inexpensive or free. It not only provides more award money, but will likely pick up defense coverage if your primary policy fails to. These are usually cheap, and sometimes free through the hospital requiring only a signature. But like other good things, don't take it for granted. Be sure you understand the process of getting it, and that you have it.

5) Verify the obvious yourself when it is imporant. Even though you are told you have coverage, your agent agrees and you have read the policy, be sure to see the actual renewal notice or contract. Murphy's law being what it is, be sure you don't wake up once you are in trouble to find some policy was not renewed, or some fine print issue not passed on to you in an annual rider that created a problem you were unaware of.

6) Know your insurance company case manager and be sure you can work well with that person. Usually you are assigned one when a case occurs, but you can request someone to confer with at any time. Usually there is a geographic assignment that makes it obvious who you will get. Your case manager, or the point person you deal with at the insurance company, plays a key role. They communicate with you, and advise you about your coverage. They also represent you in discussions on the case with the insurance company. What the company knows about you, they probably learn from the case manager. They likely will formally summarize your case in internal documents, and they will likely chose, provide documentation to, and get the feedback from an expert physician who evaluates your case. Many of these steps need your attention to have the best results from the insurance company. The manager may also influence decisions about your coverage and renewal of coverage where there are grey areas. If you feel matters are too complex for the case manager, you may also want to try and establish contact with a higher level administrator. This last step can be difficult.

7) Does your medical practice company have separate coverage from you, or will suits against you or another member of your company draw down your coverage because they are all merged? This can perversely discriminate against the owners of the company, who may find that their stake in it means other owners will draw from the insurance pool they have. But a physician employee will have a separate policy not drawing from theirs. This can be an important issue in structuring your practice and insurance. This varies from state to state, and is fought over in some areas. Be sure to understand it in advance.

8) Do you understand a bad faith claim, and the impact is has in strategy of the defense, insurance and plaintiff? A bad faith claim is an assertion against the insurance carrier that they had an opportunity to settle within policy limits, and did not. It plays a complex role in strategy for both sides, and may not be explained to you. This a major lever of the plaintiff and may also be a bargaining chip to help you if an award exceeds coverage. It obligates the insurance company to pay more if they don't solve it within the policy limits when they can.

9) Why might you need an attorney in addition to your insurance attorney? Your attorney must work in your best interests, but is still paid by the insurance company which provides their future revenue. This can create an undercurrent of a conflict at times. Here are situations in which you will need a separate attorney that you likely have to pay for yourself.: a) if the claim may exceed the aggregate coverage. b) if state licensure issues are involved. c) for actions that essentially are against the insurance company, in effect, such as a bad faith claim. d) to give you a independent general perspective and second opinion.

10) How do settlement negotiations work? How much control do you have? This varies, but once you agree to a settlement the contract language often leaves the details and amount to the insurance company to determine This is individual so be sure to understand your policy in this matter.

11) What happens if an award exceeds your coverage? This may be appealed. Or it may be negotiated. The most immediate risk to you is a problem with credit. A creditor could interfere wtih your credit standing while negotiations go on. You may well be able to prevent this, but address it early and have a contingency plant. To save time, money, worry and expense, it is wise to have your financial attorney consider this ahead of time.