Obtaining And Understanding Your Malpractice Insurance

Every professional has to have malpractice insurance. Doctors have malpractice insurance and even lawyers have their form of malpractice insurance. There are quite a few nuances in the malpractice insurance world. Today we will go over some of the important parts of malpractice insurance. I’ll also let you know how I made a mistake with my malpractice carrier that exposed me to a lawsuit.

What You Will Need To Get Malpractice Insurance

Most malpractice companies will request similar items in order to get a quote for malpractice insurance.

1. Fill out a standardized application for the insurance carrier
2. Provide the insurance company with a CV
3. Provide proof of previous insurance including “tail” if moving from one plan to another.
4. Along with proof of insurance, a “loss run” will be requested. It is a search of previous claims or payouts made by your insurance. You or your new employer can simply ask your old carrier for this
5. ID
6. Effective Date
7. Number of hours worked a week
8. Type of practice and procedures involved. Cosmetics is almost always extra.
9. Copy of your medical license

Searching For Malpractice Carriers

There are big national carriers such as The Doctors Company, which is one of the largest. Check with your local state medical board as they most likely have a list of carriers that might be of help for you. Many times a local state specific company will give you discounts for being members of their society.
TMLT here in Texas is a good example of such a company.

Type Of Coverage

Claims Made Vs Occurrence

Claims Made insurance is insurance that covers a physician based on when the claim is made.

For example: Let us say you are a surgeon and did a surgery where there was a bad outcome. The patient then gets healed over time and a year later decides to sue you. However, 2 months after the bad outcome, the surgeon decides to change jobs and get new insurance. With claims made policies, the surgeon is not covered since he or she is no longer being covered by that malpractice coverage they had at the time of the surgery. The insurance was only active for when they were paying for their policy and practicing with the same job. The doctor is exposed for liability to cover their tail after they leave their job and until the legal statute of limitations runs out. A way to avoid this exposure is often referred to as “tail insurance.”

Tail insurance: This is extended coverage for claims made insurance plans that covers a physician until the legal statute of limitations runs out. For Texas, it is slightly over 2 years. Your state timeline may vary.

Tail insurance usually costs about 2 times your yearly premiums. If you pay $5,000 a year for your malpractice, then your tail insurance is going to be about $10,000. While this is not an absolute, it is a good rule of thumb to estimate your tail coverage costs if you are responsible for your tail after you change jobs.

From my hospitalist job I had to pay $6,500 for tail insurance for my 2 year job right out of residency.

Prior Acts (Head) Insurance  Instead Of Tail Insurance

When switching from one claims made insurance policy to another, some insurance companies will allow you to cover prior acts. This means that even though they were not the insurance company that covered you during your last claim made policy, they will cover any prior acts that happened with the previous group should you be named in a lawsuit. They essentially cover your tail from that previous group.

You may find that this is cheaper as many companies will use prior acts coverage to try to get physicians on to their insurance plans. I have found that it is usually much cheaper than obtaining tail insurance. TMLT was willing to pick up my prior acts coverage for essentially half the cost I was quoted at getting tail insurance.

Why Would You Get Claims Based Insurance

Claims made insurance policies are often much cheaper for the yearly premiums compared to occuranced based.

If you think you may be at a job for long period of time, it may be in your benefit to get a claims made policy since you will pay much less yearly throughout the course of your insurance coverage with only one balloon payment at the end. The tail payment.

Other jobs such as locum tenens may benefit from occurrence based policies where the work may be brief and not necessarily ongoing for a long period of time.

Claims made insurance policies are not necessarily bad, you just need to understand what your exposure is for your tail insurance. If you are starting your own practice and plan to practice for many years, claims made will most likely financially benefit you.

There also rules and claim in policies that if you are with the same insurance companies for 5 years or longer, and retire then you do not have to pay tail.

Occurrence Based

This type of coverage is more expensive for yearly premiums. This insurance coverage actively covers you from the occurrence of the event until the statute of limitations runs out. If you leave your job, then this type of insurance does not need a tail since it is built into the underwriting of the insurance.

The benefit of this type of plan is no need to buy tail insurance.

The downside is that it is much more expensive per yearly premiums.

Frequent Coverage Possibly Included For Additional Fee

• Medical Directorship
• Medefense (Coverage if legal representation is needed for a board or hospital investigation)
• Cyber Liability
• Employment Practices Liabilities (Coverage for employment claims such as harassment, wrongful termination, discrimination.)
• Medical Legal ( In the event that you want to do legal expert witness)
• Botox, other cosmetic in office procedures

What You Need To Know About Group Coverage

Not all group coverage is the same. This is where I made my mistake.

When I started my practice, I had a claims based policy with me as the sole individual on the policy.

As I then grew to hire another physician, I had to add them to my malpractice policy. This is where my mistake occurred.

Without fully understanding my insurance underwriting, this physician was simply added underneath my coverage. Theoretically, if they have a lawsuit, I could have been exposed to the same lawsuit by simply owning the practice.

I felt like this was a dirty trick to potentially lower the cost of malpractice insurance to make the company look like they were cheaper overall. It was not disclosed to me that I had exposure until I hired my third physician employee.

Then my malpractice company brought up the fact that I would be exposed if any of them got sued and that I should have a group policy with each of us named individually. I was pretty upset that even though it appears we were covered separately, there was a risk I could be named in the lawsuit.

If you are starting up a group, make sure that you are not liable because you own the group and your insurance company did not split it up in 2 separate policies under one small group.

My malpractice company initially never told me this, that is why my quotes looked $300 a year cheaper than other providers. Once I realized the mistake and switched it, the price I am paying for malpractice insurance is exactly the same as all the other quotes  I was getting.

Step Up Payments

Anytime a physician joins a new malpractice coverage, there is a step up process. The risk of a lawsuit is a bit higher for an individual who has been working there for 3 years compared to someone who is been there 3 months.

You will find that anywhere from 4 to 6 years after starting, there is a step up process of how much money you will pay for yearly coverage until you reach a mature policy.

This natural step up is done with every malpractice company regardless if you have ever had a claim or not.

I started paying $3,000 a year for coverage my first year. A mature policy is $6,700 a year for malpractice coverage.

Midlevel Coverage

All insurance companies offer for nurse practitioners or physicians to practice underneath physicians. Some may charge you an extra premium, others may not. I have found that it is quite inexpensive, about 300 always a year extra per midlevel.

The risk then is 100% on the physician. If your midlevel gets sued, it is you that is actually named in the lawsuit. Be careful. This is not “cheap” to get coverage for them since you are taking on 100% of the risk.

So there you have it. Everything you need to know about obtaining and understanding your malpractice insurance. The devil for group plans really is in the details and make sure you sit down and understand your risk.