Understanding Coverage Changes in Medical Malpractice Insurance

The population is constantly growing, with millenials surpassing the largest generation before them – the Baby Boomers.1 As Baby Boomers age, the medical field is experiencing a greater demand for their services. An increased population that needs medical care also affects the expansion of healthcare benefits and increases medical-related lawsuits.

“As one of the fastest growing segments in professional liability, Medical Malpractice presents a unique opportunity for brokers and agents to grow their book of business,” said Nicole Greene, Director of Brokerage, Professional and Executive Liability Center of Excellence, Burns & Wilcox.

Medical Malpractice, or MedMal, is a broad category of coverages available to the healthcare industry. It most often refers to the negligent acts performed by a doctor, medical facility or hospital. Properly insuring these exposures requires familiarity of the industry and often entails working with a specialty underwriter.

“We routinely work on Medical Professional Liability (MPL), Hospital Professional Liability (HPL), Miscellaneous Medical Professional Liability (MiscMed) and Miscellaneous Medical Facilities Professional Liability (MedFac),” said Karl Olson, Vice President, Professional Liability Regional Practice Leader, Burns & Wilcox Brokerage.

If a broker or agent is not familiar with working with medical insurance policies on a daily basis they may overlook that coverage exposure and could become a costly error for all parties involved.

When a doctor retires or a practice is sold

Medical professionals need to be mindful of continuity of coverage due to their profession and state-governed statutes. This has risen from negligent treatment or diagnoses that are not immediately known. For instance, a pediatric doctor’s MedMal cover must address the possible 18-year statute of limitations. In non-medical industries, if a service is not rendered properly, the customer will almost immediately be aware. However, in regards to medical services, it may take years for a claim to be known and mature.

The nature of providing medical care places the medical professional on a higher level of expected performance, with negative outcomes that unfortunately may take years to develop. Subsequently, they have longer exposures because of the services they render.

“If a doctor retires or a practice is sold and merges with a new medical network, coverage is still needed for any exposure that may arise from treatment under their care,” said Greene. “Medical Malpractice Tail coverage can be provided to these types of clients. The most commonly offered timeframes are three-, five-, or seven-year, but some carriers even offer an unlimited tail option. Brokers will need to speak with their clients about their timeframe needs as they vary from state to state and from client to client.”

Olson added that MPL coverage can be tailored to include an automatic retirement cover for doctors as part of death, dismemberment or retirement (DDR).

“When a practice is sold or merges with another, the new entity does not automatically pick up prior exposures,” said Greene. “As part of the merger transaction, the two parties will negotiate terms of the sale which will determine whether the sale was an asset only or asset and liability sale. This will be the critical determining factor as to whether the previous owner needs to purchase a Standalone Tail or Standalone Extended Reporting Period (ERP) policy or if the new owner will need to negotiate with their insurance carrier to cover for the newly inherited prior acts liability that they agreed to be liable for from the sale.”

Transferring from one policy to another

“When medical professional clients are transferring coverage from one policy or carrier to another, brokers and agents should make sure that they have protection against prior acts,” said Greene.

Medical professional clients experiencing a merger or acquisition also need to maintain the “retro date” on the Claims Made Policy. Maintaining this date is important for previous claims and establishes the existence of prior coverage, according to Greene.

For example, if a policy starts today for one year and does not include a retro date, it is considered an inception policy. If any negligent acts were performed prior to today, the current policy would not respond even if the claim is filed during this policy period.

“Doctors that move from one state to another may run into issues as well,” stated Olson. “If a physician moved from Illinois to California to join a new medical practice, they may not be covered for any negligent activities in Illinois. In these situations, brokers should instruct the physician to separately purchase prior coverage for Illinois exposures before moving. It is also in the best interest of the new medical group to protect their own coverage and limits from responding to a prior act emanating from the physician’s previous – and unrelated – activities.”

When a doctor needs independent coverage

When a doctor is seeking independent coverage, it is important to understand why. Getting the right questions answered by the doctor in this situation is important for providing the right coverage and potentially getting a bigger return. These questions should include:

  • Do they work at just one facility or multiple?
  • Whom do they perform services for?
  • Who is hiring them? If the doctor is working at a facility, is that facility providing medical malpractice for the doctor? If so, what limits, and is the doctor comfortable with those limits or do they want do purchase higher limits themselves?
  • Does the facility have coverage? Brokers can write either the entire facility or just for the doctor.
  • Do they own their own practice?
  • Is the doctor moonlighting (working 80% of day at a clinic and somewhere else at night)? Olson stated that some policies will not extend to beyond a single facility and this must be requested as an inclusion.
  • Are they an independent contractor or do they work at a clinic full-time?

These questions will help the broker and specialty underwriter know how to structure the policy. To aim for a bigger return, Greene described that brokers who would normally write a Physician Professional Liability policy for a single doctor should consider asking about covering the additional exposure of the facility in which they work as well.

“When working with medical professionals on MedMal policies, it is important to think about the long game – not just the immediate exposure,” said Olson.

As Baby Boomers are aging and newer generations are growing larger, the medical space will continue to expand – thus needing more insurance support. While other markets may be stalling, medical will be growing and could be a great area for brokers and agents looking to become more specialized.

References

  1. Pew Research