A physician’s guide to professional liability insurance

Knowing you’re covered by professional liability insurance and understanding what that means are two very different things.

For most physicians, the burden may be as simple as knowing the carrier, the policy limits and the process your employer requires for reporting potential or realized claims against you.

For others, such as those in a partnership, private practice, or shareholder group, you will need to research potential carriers, understand policy options and the potential impact on your practice should a claim be filed, and consult with professionals regarding the best policy for your practice.

What’s available

There are two basic forms of medical malpractice insurance: claims based and occurrence based.

A claims-based or claims-made policy provides professional liability coverage for incidents that occur and are reported during a period of coverage by a particular carrier.

What’s important to understand with this type of policy is that both the incident and the claim must occur during the period of coverage for the policy to cover the claim.

This is important to understand because most states provide a statute of limitations on professional negligence claims and thus the claim for any given incident may occur within two to five years after the occurrence.

If you have a claims-based or claims-made policy and you leave your employer or your current employer changes carriers, you are best advised to seek out “tail” coverage. Tail coverage will extend the prior claims-based coverage and protect you should a claim arise later.

It will be important to review your employment contract to see if your current or past employer is responsible for payment of this coverage, if you are bound to initiate your own tail coverage, or if the agreement is silent on tail coverage.

The most important thing to remember with any type of coverage is that all dates of practice are covered by a sufficient policy.

Occurrence-based policies are far more desirable. So long as the incident claimed occurs during the period of coverage, the claim will be covered by the policy even after your departure from the group or change in coverage. This option offers the most consistent and predictable coverage.

It’s important to note that the employment contract should specify the amounts of coverage—at a minimum, the amount of coverage per claim and the aggregate amount of coverage. These amounts should match what is either required by your state as minimum coverage or be reasonably sufficient for your area of practice. There is also the option to elect for greater amounts of coverage.

What to do if a claim is filed

Most employment contracts specify that if you are aware that a claim has been filed against you, or you reasonably believe someone may file a claim against you, it must be immediately reported to the employer.

If you believe a claim will be filed against you or learn that a claim has been filed against you, it is of utmost importance to review your employment contract for direction. You should examine the time frame for reporting to your employer, the information you should provide to your employer, and the exact contact information for reporting to the employer.

More often, the physician learns about a claim from the employer. This is because the insurance carrier is often notified of the claim prior to filing a lawsuit, and that carrier in turn contacts the insured, which is the employer. It is also not uncommon that the employer will be serviced with summons and notice of the lawsuit before the physician.

When this occurs, the employer will likely contact you and explain the process from that point. You may or may not be contacted by the insurance carrier. You will likely be contacted by the law firm or attorney elected to represent the insured for information or clarification on the facts of the case.

If for any reason you learn that a claim has been filed against you but you believe you are not covered or no attorney is appointed to represent you, it is important to immediately seek out the advice of an attorney who specializes in medical malpractice defense.

More to know 

Do I live in a state that has regulated the amount of damages that can be awarded?

Knowing the answer to this question will help you better understand the amount and type of coverage you need, as well as better understand why your employer is offering the coverage they have elected. 

Most states do not place a limit on the amount of damages that may be awarded, though nearly every state has outlined the claimant’s burden of proof to recover.

What is a consent-to-settle clause?

A consent-to-settle clause specifies that a claim against you cannot be settled without your written consent. This clause is desirable because it may prevent the carrier from settling a frivolous claim against you, thus preventing future problems with insurance status, reporting and procurement of new employment.

Most employers and carriers will not include this type of clause because of the costs and benefits of settling for the carrier and the decrease in risk of exposure for the insured (your employer).

Be certain that if your employer includes or agrees to include this type of clause that you carefully consider the advice of your attorney regarding the benefits of settlement and the detriments of proceeding to trial.

Will there be any cost to me if there is a claim made?

The answer to this question largely depends on the type of coverage and your position of employment. For example, if you are a shareholder, and thus the insured, you will want to investigate the cost of any deductibles should a claim be made against you or one of your employees.

Or, in the alternative, if you are the employee, you should seek information about whether or not any part of a settlement or judgment can be passed on to you. It is especially important to examine your employment contract for language regarding indemnification and exceptions to claims coverage.