Malpractice insurance is becoming an expense that more and more physicians can not afford. However, the costs a physician could incur to successfully defend a single claim of malpractice would likely exceed the annual premium for liability insurance, and this fact alone makes malpractice insurance a sound business expense. Deciding how much or what type of insurance to purchase is a personal decision based on a number of factors such as (1) your specialty and the risk it entails, (2) practice location, (3) how much of your assets you are willing to risk, and (4) state requirements. The following tips will help you in your search for the right malpractice insurance.
Tip #1: Assess Potential Insurance Carriers
The American Medical Association warns, “Do not buy insurance solely on the basis of the premium charged.” Other important factors to consider are…
– Financial stability – to find out a company’s financial rating visit ambest.com
– Protection against insolvency – find out what state guaranty funds are available if the insurer becomes financially unable to pay claims
– Performance record – state insurance departments can provide useful information about specific insurance carriers licensed within the state
– Handling claims – know and understand the insurer’s method of handling claims
Tip #2: Compare Coverage and Exclusions
Once you’ve identified two or more potential insurance carriers ask for a copy of the policy so you can compare the coverage and exclusion sections. Some will cover not only claims of professional negligence but also claims of unprofessional conduct. Most policies exclude claims involving punitive damages, intentional misconduct and contractual indemnity claims. Compare the language of each such exclusion in the policies you are considering and seek advice from your insurance agent or attorney.
Tip #3: Carefully Review the “Consent to Settle” Provision
These provisions define the terms under which a settlement might be agreed upon by the insurer and the physician. These clauses should be reviewed carefully. You may find that the provision contains a “hammer clause.” This clause allows the insurer to “cut you loose” if you refuse to settle. Leaving you responsible for ongoing defense costs and the amount of any verdict that exceeds the amount of the recommended settlement.
Tip #4: Do Not Lie or Shade Your Application
When a malpractice suit is filed, your insurer will try to avoid covering the claim by looking for false or missing information on your application. When filling out the application you should always err on the side of full disclosure. To ensure accuracy, you should complete your own application or at the very least review it carefully prior to submission.
Understanding your malpractice policy can be complicated yet critical. When shopping for a new policy or renewing a current policy, do your homework and if necessary ask an attorney for advice.
*Family Practice Management – www.aafp.org/fpm – March 2003
*American Medical Association – www.ama-assn.org – October 2005