I nsu ra n ce
Morsal R.Tahouni,MD, Joseph H. Kahn,MD, FACEP*
Essentially all emergency medical practitioners carry some form of professional liability insurance. Most hospitals, clinics, and health centers will not allow a physician to practice in the absence of professional liability insurance.1
In the United States, medical liability insurance has been in a state of crisis repeatedly over the past 40 years. The first crisis occurred in the early 1970s, when malpractice insurance became unavailable to some physicians because the increase in malpractice claims drove many insurance carriers from the market.2,3In the 1980s,
the second crisis occurred, as another increase in the size and frequency of claims sent the premiums for malpractice insurance to a level that was unaffordable for many practitioners.2,3A third crisis started in 2003, again due to decreased availability
and affordability of malpractice insurance policies. The increasing number and size of claims with the resultant increase in malpractice policy premiums, particularly in high-risk specialties, has led to an exodus of physicians from high-high-risk specialties and a crisis of specialty care access for patients.2–8
The process of choosing a stable malpractice insurance carrier, the type of coverage, and the limits of liability can be daunting for the emergency practitioner. Even if malpractice insurance is provided by the hospital, clinic, urgent care center, or physician group, it behooves the practitioner to have a working knowledge of professional liability insurance. The practitioner not only needs insurance coverage but also needs to know if there are exclusions to this coverage, what the reporting requirements are, and whether the insurance will continue to cover claims of alleged malpractice that occur after the practitioner has left that facility. Furthermore, it is essential for the practitioner to know whether the liability insurance carrier will assign a defense attorney and if the practitioner can choose an independent defense attorney. The physician also needs to know whether the insurance carrier can settle a claim against the physician without the physician’s consent.9
Department of Emergency Medicine, Boston Medical Center, Boston University School of Medi-cine, 1 Boston Medical Center Place, Boston, MA 02118, USA
* Corresponding author.
E-mail address:[email protected](J.H. Kahn).
KEYWORDS
Liability Insurance Risk Risk management Tail coverage Nose coverage
Emerg Med Clin N Am 27 (2009) 569–581
doi:10.1016/j.emc.2009.07.002 emed.theclinics.com
With approximately 25,000 board-certified emergency physicians practicing in the United States (as of 2005),10and at least 80 medical professional liability insurance
companies underwriting policies in the United States (many being state-specific), the choices are confusing.11Keeping abreast of malpractice awards and settlements
in a practitioner’s area may be helpful in choosing limits of liability. Knowledge of strengths and weaknesses of different policy types is also helpful in making an intelligent choice.
ANATOMY OF A POLICY Indemnity
Indemnity protects the medical practitioner from claims filed by a patient, patient’s family, or patient’s estate.12 The medical malpractice liability policy should clearly
state what is covered by the policy.13Generally, the policy will provide coverage for damage sustained by a patient while receiving professional medical services from a health care provider or facility.13
The policy may also cover the cost of defense counsel for the practitioner who is the target of the lawsuit, but this must be stated in the policy. It is important to clarify whether the cost of providing a defense is subtracted from the policy limits.13
Finally, the practitioner should ascertain whether interest on an award for a plaintiff is covered, because interest can be substantial in a case that is decided years after the alleged malpractice occurred.13
Declarations
The declarations page of a professional liability insurance policy includes the name of the insured, the date that the policy is effective, the policy period, the limits of liability, the amount of the insurance premium, and the coverage restrictions, if any.14The declarations page summarizes the policy and is often required by hospitals
and licensing boards when applying for privileges.
The limits of liability stated in the policy’s declarations usually include 2 figures. The first figure is the limit of liability for the practitioner for a patient, and the second is the limit of liability for the practitioner for the policy period, which is usually 1 year. Limits of liability should be adequate to protect the physician’s assets in the event of an award. What the limits of liability should be is a topic of some debate. Some practitioners mistakenly think that keeping the limits of liability low will reduce the size of the award to fit the policy. Finding out what limits other emergency physicians carry in the same area may serve as a guide to selecting limits of liability. In group practices, the prac-titioner should clarify that the limits apply to the individual and not to the group.13
Conditions
Carefully understanding the conditions of coverage of a medical liability insurance policy may be the most important aspect of a medical practitioner’s review of the policy. The practitioner must meet the conditions to be covered by the insurance policy.
Many policies require the condition of notice, which means that the physician must notify the insurance company as soon as possible when an adverse event occurs that the physician believes may result in a claim.15Failure to notify the insurance carrier in
a reasonable time after the event can constitute grounds for the carrier to deny coverage.13It may be confusing for a physician to determine which events should prompt notification of the insurance carrier. Not every poor patient outcome warrants notifying the carrier, but cases in which the physician or administrator thinks that a malpractice claim is likely should prompt notification.
Another condition of a professional liability insurance policy may be that the physi-cian cooperates with the insurance company in defending the claim. Not cooperating and assisting in discovery and trial, and in preparations for discovery and trial, may be grounds for an insurance company to deny coverage.13
Insured
The professional liability insurance policy may be in the name of an individual or a group. Policies issued in an individual’s name definitely cover that individual.16If,
however, the policy is issued in the name of an emergency medicine group or health care facility, then the physician should be listed as an ‘‘additional insured.’’13If the
practitioner is not listed as such, then the policy should state that all physicians are covered while they are practicing medicine for the physician group.13
Endorsements
An endorsement can add to or limit the scope of coverage of a professional liability insurance policy. It may be called an amendment or a rider.14An endorsement can
add coverage for a person, a procedure, or a geographic location. It can also exclude coverage for an individual, a procedure, or a location. The policy holder should care-fully review endorsements to see that they meet the needs of the insured.
Exclusions
The exclusions of a professional liability insurance policy can significantly reduce the coverage provided by it. Exclusions may state that a physician will not be covered for procedures outside of the physician’s scope of practice, or they may exclude coverage for punitive damages13or for nonclinical activities, such as administration
or emergency medical service activities, that the physician performs within the hospital or physician group.17Furthermore, physicians who choose to participate as
expert witnesses in legal proceedings may be liable for any testimony given, depend-ing on the jurisdiction, and they should consult with their insurance carrier regarddepend-ing whether such practices are covered under their policy.18Physicians need to be aware of coverage exclusions, to ascertain whether the hospital’s insurance covers the activity or if an endorsement can be added to the policy to cover it.13
Occurrence
An occurrence is an unexpected event that happens in the course of medical practice, which may or may not result in harm to the patient.13Depending on the nature of the occurrence, the hospital administration may need to be notified with an incident report.19If the hospital or the practitioner thinks that a lawsuit may result from the
event, then the professional liability insurance company should be notified. Incident
An incident is an event that the patient, or someone acting on behalf of the patient, claims caused harm to the patient.14
Claim
A claim occurs when a patient or a patient’s guardian, proxy, or estate makes a written demand for money. This demand may be through a lawsuit or through another avenue, such as a state malpractice screening board.14Once the practitioner is notified of a claim, immediate notification of the liability insurance carrier is required, so that the insurance company and the defense attorney can begin their investigation with the cooperation of the practitioner.
Limits of liability
Limits of liability generally consist of a per-case limit and annual limit. Determining the acceptable limits of liability that a given physician requires is a difficult task; limits probably should be based on the recent average payment from the top 10% of malpractice payments made in the physician’s specialty and the region in which that physician practices.20It is not practical to base the limits on the top 1% of awards,
as these are outliers that generally exceed available insurance limits.
The average malpractice payment (including awards and settlements) for US physi-cians across all specialties has increased from $173,018 in 1991 to $263,101 in 2003 (Table 1).20These figures are misleading when choosing limits, because the average
highest 10% of malpractice payments (including awards and settlements), for US physicians across all specialties, has increased from $867,792 in 1991 to $1,115,031 in 2003 (seeTable 1).20,21In 2001, the average payment for the highest
10% of awards (not including settlements) was $2,827,785, but this figure had retreated to $1,850,294 by 2003 (Table 2).20
When choosing limits of liability, physicians should consider the malpractice environment of the state in which they practice (Fig. 1).22Some states have taken
steps to improve the medical liability environment, such as limiting the size of punitive damages, creating medical malpractice screening panels, and creating state-funded patient compensation funds.2
Table 1
Change in medical malpractice payments made on behalf of physicians, 1991^2003
Year
Judgments and Settlements Number of Payments
in NPDB
Average Payment ($)
Average Payment for
Highest 10% of All Payments ($)
1991 13,365 173,018 867,792 1992 14,119 194,893 972,65 1993 14,151 197,152 955,292 1994 14,568 200,908 995,174 1995 13,511 207,863 999,689 1996 14,240 220,062 913,449 1997 13,845 219,881 973,642 1998 13,305 225,187 985,769 1999 14,175 232,711 1,050,898 2000 14,626 247,651 1,054,807 2001 15,694 258,965 1,130,976 2002 14,539 262,629 1,127,478 2003 14,368 263,101 1,155,031
Test for trend P<.000 P<.000
1991–2003 growth 52.1% (4.0%) 33.1% (2.5%)
2000–2003 growth 6.2% (1.6%) 9.5% (2.4%)
Abbreviation: NPDB, National Practitioner Data Bank.
Data from Chandra A, Nundy S, Seabury SA. The growth of physician medical malpractice payments: evidence from the National Practitioner Data Bank. Health Aff (Millwood) 2005:Suppl Web Exclusives:W5-240–9.
Table 2
Change in medical malpractice payments made on behalf of physicians, 1991^2003
Year
Judgements Number of
Payments in NPDB Average Payment ($)
Average Payment for Highest 10% of All Payments ($) 1991 459 320,917 1,472,779 1992 413 398,890 2,111,009 1993 444 422,652 2,034,162 1994 419 353,326 1,542,976 1995 398 369,793 1,798,806 1996 578 387,264 1,634,023 1997 453 384,905 1,594,561 1998 401 425,663 1,764,773 1999 404 387,782 1,447,200 2000 537 474,821 1,840,507 2001 533 601,155 2,827,785 2002 411 488,020 1,903,668 2003 430 460,736 1,850,294
Test for trend P<.006 P<.295
1991–2003 growth 43.6% (3.4%) 25.6% (2.0%) 2000–2003 growth -3.0% (0.7%) 0.5% (0.1%) Settlements 1991 12,906 167,758 853,373 1992 13,706 188,746 918,424 1993 13,707 189,847 894,590 1994 14,149 196,395 908,393 1995 13,113 202,948 997,338 1996 13,662 212,988 898,364 1997 13,392 214,298 945,389 1998 12,904 218,958 949,778 1999 13,771 228,162 1,015,759 2000 14,089 238,992 1,023,973 2001 15,161 246,935 1,064,999 2002 14,128 256,072 1,095,691 2003 13,938 257,004 1,080,121
Test for trend P<.006 P<.000
1991–2003 growth 53.2% (4.1%) 26.6% (2.0%)
2000–2003 growth 7.5% (1.9%) 5.5% (1.4%)
Data are for all payments (judgments or settlements) involving a physician defendant in the 50 states between January 1, 1991 and December 31, 2003. All dollar values are converted to year 2000 dollars using the implicit gross domestic product price deflator and are rounded to the nearest dollar. Numbers in parentheses are average annual growth rates.
Based on data from Chandra A, Nundy S, Seabury SA. The growth of physician medical malprac-tice payments: evidence from the National Practitioner Data Bank. Health Aff (Millwood) 2005:Suppl Web Exclusives:W5-240–9.
TYPES OF INSURANCE
The current professional liability environment provides a broad array of insurance options for the emergency medicine provider, depending on the provider’s specific needs. Although not meant to be all-inclusive, this section introduces many of the basic concepts in the different forms of insurance coverage available.
Primary Insurance
Primary insurance is the insured’s first line of protection from liability claims, covering losses up to the monetary limits defined in the insurance policy.
Excess Insurance
Excess insurance is a secondary policy purchased by the insured to cover losses greater than the limits listed in the primary policy. This type of policy may be used to increase current monetary coverage or to temporarily provide extended coverage in times of increased financial risk.
Commercial Insurance
The most common type of professional liability protection, commercial insurance, is purchased from one of many insurance providers that operate inside the United States. Commercial carriers provide a wide range of insurance options that are easily accessible and reliable. Increasing litigation in recent years has created some disad-vantages for the provider purchasing from commercial carriers, because most insurers have limited the areas in which they provide insurance (either by specialty or geography) or have drastically increased premiums to help cover the increase in litigation.3
Fig. 1. A grading scheme for the favorability of the liability environment in each US state. (From Epstein SK, Burstein JL, Case RB. The National Report Card on the State of Emergency Medicine: evaluating the emergency care environment state by state, 2009 edition. Ann Emerg Med 2009;53:4–148; with permission.)
Captive Insurance
When a provider creates a separate legal entity (such as a sister or subsidiary corporation) to act as a limited-purpose insurance company, this is known as captive insurance.23 Such programs require either internal or external personnel
to manage the different functions of the company, and they are often created off-shore. The company usually enters into a reinsurance agreement with a commer-cial insurer, to reduce the risk of the company and provide additional financommer-cial coverage in exchange for a portion of the premiums paid.23 Captive insurance
offers providers decreased premiums and easier reinsurance; however, it is associ-ated with a much higher start-up and management cost than self-insurance trusts. Captive insurance companies include those that insure only their parent company and affiliates or insure external groups and providers operating under the same professional risks.
Risk Retention Groups
A risk retention group (RRG) is a distinct type of captive insurance company that allies groups or persons engaged in similar business practices to provide liability coverage for its members.13,23Because of the Federal Risk Retention Act of 1986, once an RRG
is licensed in one state, it may cover members in any other state regardless of differing liability and licensing laws. RRGs also allow group members to control the amount and rate of liability coverage and to participate actively in risk management for the group.
Channeled Insurance Programs
Channeled insurance programs (CIPs) are another form of captive insurance company and are created to provide liability coverage solely to a hospital or group of hospitals, including affiliates and employees.13 CIPs do not generally assume risk from any
outside individuals or institutions. Liability risk is channeled to a third party, the CIP, thereby obviating the need for the numerous employees of a hospital or a hospital system to obtain individual liability insurance.
Self-insurance Trusts
A self-insurance trust is insurance created when a provider contributes money into a trust fund that is created for the purpose of covering professional liability losses.23
The fund is managed exclusively by the provider with the aid of a fiduciary, usually a financial institution (lawyer, bank, or investment firm). This provides certain advan-tages for the provider, including reduced costs of coverage and increased control in management of claims and settlements.23However, the provider must also determine
the amount of money required to maintain the trust, evaluate the potential risk of those involved, and assume overall management of the trust. Providers can create self-insurance trusts as a form of primary self-insurance, thereby decreasing the cost of liability insurance and freeing up funds to purchase excess insurance from a commercial provider.23
Off-shore Insurance
This term pertains to any insurer whose location of business is outside the United States.13 Captive insurance companies and self-insurance trusts are sometimes
created in these jurisdictions, with beneficial tax laws and financial incentives, to decrease the monetary burden of operating such an institution.23
TYPE OF COVERAGE
The 2 most common forms of professional liability insurance are claims-made and occurrence coverage. Each form carries its own complexities, advantages, and disadvantages. Therefore, it is important for the emergency medicine provider to understand the differences and subtleties of each form, to ensure complete protection from litigation. The main difference revolves around what the insurer defines as the coverage trigger, the event that activates insurance coverage.
Claims-made
The most common form of professional liability insurance, claims-made insurance, defines the coverage trigger as the moment the insured becomes aware of a potential or real claim. It is the insured’s responsibility to notify the insurer of such claims imme-diately. Therefore, the policy only covers those claims that the insured became aware of during the policy period. One advantage to this form is that it covers claims regard-less of the time during which the event occurred, providing that the inciting event occurred before a date named in the policy.24 The insured must be cautious in
following the reporting procedures outlined in the insurance policy. Failure to follow the procedures could result in the insurer withdrawing coverage for that claim. Further-more, this form of policy will not cover any claims that the insured becomes aware of after the policy period has ended, leaving the insured potentially unprotected if no further coverage is acquired.24
Occurrence
Occurrence policies define the coverage trigger as the date the event leading to a claim occurred. Therefore, the insured is protected regardless of when a claim is made and has fewer responsibilities in reporting the claim to the insurer. Protection is for the event, regardless of when a claim is made and even if the policy is long expired, as long as it occurred during the coverage period, thus obviating extended coverage.24
Occurrence policies tend to be more expensive, however, and are less readily avail-able from commercial insurers.
Modified Claims-made
Some insurance providers have begun to offer a form of claims-made insurance entitled modified claims-made coverage. This type of coverage is geared toward groups with a low-risk profile and minimal claims history.25These policies usually include built-in
prior acts coverage and tail coverage, at a substantially reduced price from usual occur-rence policies.25However, modified claims-made polices are not offered in all areas
and can be difficult to obtain for providers with a history of prior claims. Nose Coverage
Nose coverage is also known as prior-acts coverage. Physicians using claims-made coverage may, at times, find themselves in need of a limited-term policy to cover gaps in coverage between new and old insurance policies. This type of coverage is termed a ‘‘nose’’ when it is purchased from a physician’s new insurer. It will cover any claims made against the insured for a specified amount of time, starting when the prior policy expires and extending until the new policy takes effect. Nose coverage costs less than tail coverage, because the insured will have to pay rates similar to the premium of their new coverage. Unfortunately, nose coverage is not always offered from the new insurer. Physicians leaving group practices, for instance, are often not eligible for nose coverage if they are covered under a group policy.26This is because
it can be difficult for the new insurer to separate out the individual physician’s risk from the rest of the group.26 Availability will also vary depending on the individual
physician’s risk profile and the location of practice.26
Tail Coverage
Also referred to as an ‘‘extending reporting endorsement,’’ tail coverage is similar in function and scope to nose coverage. It is purchased from the previous insurer as opposed to a new insurer. Most primary insurers will offer tail coverage when a physi-cian is near the end of a policy’s term or chooses to leave a group policy. Physiphysi-cians must purchase this coverage, usually within 30 days, or the offer will be rescinded.26,27
However, tail insurance comes at a much higher cost than nose coverage.
Given the high cost of tail coverage, responsibility for the coverage can vary depending on a physician’s contract. Some contracts force physicians to pay the cost of the tail and enforce a time limit for arranging it.27This serves the employer’s
interests by protecting its assets once a physician has left and by devolving the costs of such protection to the leaving employee. Other employer contracts may provide for payment of some or all of the cost or provide for negotiating payment depending on the circumstances surrounding the physician’s end of employment.27
There are circumstances in which physicians are eligible for ‘‘free’’ tail coverage. For example, when a physician’s risk profile decreases dramatically, it is prudent for the insurer to provide this free coverage. When a physician dies, the insurer may assign free tail coverage to protect the deceased’s estate.27 Furthermore, if a physician
becomes disabled and is no longer able to practice, the insurer may also offer a free tail to the physician.27Finally, some physicians are eligible when they retire
from clinical practice. However, the definition of retirement may differ depending on the insurer and may not cover all circumstances.27
INSURANCE OPTIONS
To cater to the expanding business of medical practice, insurance carriers now offer a greater variety of malpractice coverage options for the emergency medicine practi-tioner. Although not appropriate for every physician, these options provide extended coverage for special situations depending on the physician’s practicing environment. Billing Errors and Omissions
This optional coverage provides protection for physicians accused of Medicare or Medicaid fraud.28Depth of coverage varies per insurance provider. Some policies
may cover only legal expenses associated with the instance, whereas others may pay a portion or all of the associated penalties or settlements.
Legal Expense
Most malpractice policies provide coverage for legal expenses occurring in situations wherein the physician is directly named in legal action. However, this special coverage option provides legal expense reimbursement when a physician is required to partic-ipate in legal processes, resulting from action taken against a colleague or coworker. In certain instances, it may also cover expenses associated with disciplinary or licensing processes.28
Loss of Income
Medical liability policies typically provide reimbursement for loss of income incurred during legal processes. This type of coverage includes participation in hearings, depositions, and trial proceedings, and is usually assessed on a per day basis.
Sexual Misconduct
Expenses stemming from claims of sexual misconduct made toward a physician are not always covered by malpractice policies. This special coverage provides physi-cians with protection and reimbursement for claims made against them while they are providing health care services.28These policies are specifically intended to
reim-burse the physician for the cost of defense in a civil proceeding.28
Equipment Maintenance
The multiple contracts required for the preventative maintenance and repair of medical equipment can be difficult to manage for many hospitals and physician groups. This coverage option allows the policy holder to consolidate the various contracts for the care of medical equipment under 1 policy, usually decreasing overall cost and improving efficiency.
SELECTION OF COUNSEL Insurance Counsel
Generally, the professional liability insurance carrier will assign an attorney to repre-sent the physician in the event of a lawsuit and will pay the attorney’s fees. It is advis-able for the physician to have knowledge of medical malpractice defense attorneys in the community and to make a recommendation to the insurance carrier.29If the
insur-ance carrier will not take input from the practitioner in selecting an attorney, then the physician should investigate the attorney’s malpractice defense experience and record, looking particularly at experience with emergency medicine lawsuits. Hospital Counsel
The hospital or other health care facility where the alleged incident occurred may also be named in the lawsuit. If the physician is an employee of the hospital, then the hospital attorney may be assigned to defend the physician. It is important for the physician to clarify whether the hospital attorney is representing the health care facility, the physician, or both, at the beginning of the case and before having in-depth discussions with the hospital attorney.30
Independent Counsel
Physicians must realize that the legal counsel assigned by the insurance company is representing the insurance company and themselves and that at times, the goal of the insurance company may differ from that of the physician. The physician may not want to admit any culpability in a case, whereas the malpractice insurance carrier may be willing to admit the physician’s culpability and settle the suit for an amount which it thinks will be far less than a jury may award.31In this situation, the settlement will
be reported to the National Practitioner Data Bank, the state medical licensing agency, and the hospital, even though the physician denies culpability and there has been no jury trial. In such situations, it may be preferable for the physician to hire independent counsel, even though the insurance carrier will not cover the legal fees. Another consideration for hiring independent legal counsel is a lawsuit with a probability of a high jury award exceeding the insurance policy limit of liability. In such cases, the physician defendant would be liable for the amount of the award above the limit of liability. Exploring all options including an offer to settle at the limit of liability should be considered, particularly if there are multiple named defending parties to the lawsuit, all being represented by one entity and carrier. The best interests of the individual physician may differ from those of the insurer or other named defending parties.
Independent counsel can address these situations solely from the individual physician’s perspective.
Joint Counsel
Not infrequently, there may be more than one defendant in a case, and all defendants may be assigned the same counsel. A joint defense refers to 1 attorney representing both practitioners (joint counsel), or 2 different lawyers representing 2 different clients, but with the same defense strategy.13
Joint counsel may work to the advantage of a defendant through sharing of informa-tion and avoiding the situainforma-tion wherein one defendant tries to convince the jury or the plaintiff that the other defendant is more culpable.13The disadvantage of joint counsel
is that when one defendant is found liable, it makes both defendants more likely to be liable, because a single defense strategy is used. Furthermore, one party being under-insured may even result in a larger payout for the less culpable defendant.13
CONSENT TO SETTLE
When a patient or agent of the patient files a medical malpractice claim against a physi-cian, it may sometimes benefit the physician to settle the claim without a jury trial. An example of such a situation is when a jury verdict in favor of the plaintiff is likely, and the jury award is likely to exceed the limits of the malpractice policy. There are times, however, when the insurance company may want to settle but the physician may not. The insurance company may think that a plaintiff verdict is likely in a jury trial and so may want to settle the case at a lower amount than a jury is likely to award. However, the physician accused of malpractice may believe that she or he is not culpable and may not want to settle the case.
The professional liability policy usually states whether the insurer needs the consent of the physician to settle the case.29This should be clarified by the practitioner when
obtaining the coverage. Although it is preferable for the insurance carrier to need a physician’s consent to settle, a refusal to settle in these circumstances does expose the physician to greater liability,13 especially if the subsequent award exceeds the
limits of liability of the policy. Hammer Clause
There is another risk to the physician who chooses not to settle when the insurance company wants to do so. Some medical liability insurance policies have a ‘‘hammer clause,’’ which states that if a physician refuses to settle at the amount that the insur-ance company has negotiated with a plaintiff who later wins at trial, then the physician is responsible for any award in excess of the negotiated settlement.28
FINANCIAL STRENGTH RATINGS
Multiple methods can be used by a practitioner to assess the quality and stability of an insurance carrier. One of the more commonly used is a financial strength rating. These ratings are issued by an independent third party known as a nationally recognized statistical rating organization (NRSRO). NRSROs are regulated by the Securities and Exchange Commission (SEC), and are allowed by the SEC to issue financial strength ratings for various financial institutions, including insurance carriers.32These ratings
are in essence an assessment of a financial institution’s creditworthiness, and they are used to guide investors, financial regulators, and other interested parties.32
Currently there are 10 NRSROs registered with the SEC; however, one deserves special mention in discussing professional liability insurance. A.M. Best Company,
founded in 1899, with offices in New Jersey, Washington, DC, and other international locations, specializes in financial strength ratings for insurance companies.33 A.M.
Best issues reports regularly, assessing the financial health of insurance providers. The company evaluates the insurance carrier’s balance sheet, operating performance, and business profile.34Using these factors, the company then assigns each carrier a letter grade (A11 to F, with special designations). These letter grades correlate with a further assessment of each carrier as secure or vulnerable.34
A.M. Best ratings, and those of other NRSROs, provide an objective, timely estimation of an insurer’s relative financial stability and ability to cover the potential risks of the insured. Physicians who are considering the purchase of a policy from an insurance carrier should consider that company’s financial strength rating among the many other factors involved in such a decision. Failure to do so can leave a physician without proper liability coverage, despite fully paid premiums, and scrambling to find a new insurer. Further information about the methodology used in creating these ratings and the proper use of these ratings can be found on the SEC’s Web site and each NRSRO’s Web site. SUMMARY
The emergency physician needs to be aware of several issues regarding professional liability insurance. Firstly, the physician should know the type of insurance (occurrence or claims-made); whether this is the only type available in the physician’s region; whether tail coverage is available at a reasonable rate, and who pays for it, if it is claims-made insurance. Secondly, the physician should know the limits of liability of the policy, and whether these are appropriate for emergency medicine in the practi-tioner’s geographic region. Also, it is helpful to know whether the malpractice insur-ance company provides an attorney in the event of a claim, whether the attorney fees are covered by the policy, whether the attorney fees are subtracted from the limit of the policy, and whether the physician can choose a defense attorney. Other essen-tial information includes policy exclusions and restrictions and whether the physician’s consent is required for the insurance company to settle a case. The physician should be aware of the financial strength of the insurance company.35This article has
attemp-ted to introduce the emergency physician to these and other important issues regarding medical liability insurance.
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