Law & Medicine

Understanding malpractice insurance


 

Question: You are about to retire, and it was one of those hectic and unbelievable final days. Your clinic assistant broke a hypodermic needle, which lodged in the patient’s deltoid. Another patient tripped and fell in your waiting room and sustained a fracture. And, in a heated and angry meeting, you voted with others on the peer-review committee of your hospital to suspend a "rotten apple" doctor. All three victims file suit against you 6 months into your retirement. Which of the following best describes the likely outcome?

A. Your professional malpractice insurance will indemnify you against all liabilities.

B. Only the first incident will be covered, because it’s the only one that involves malpractice.

C. Even the first incident is excluded, because your policy protects you but not your employees.

D. You face financial ruin, because you are now retired and no longer insured.

E. It all depends on your insurance policy.

Answer: E. Most professional liability policies should cover negligence on the part of the doctor and employees, as well as peer-review risks, although the hospital may also provide this latter coverage.

However, some policies are less expansive, so it behooves the doctor to carefully review the scope of coverage to include the above eventualities and others, such as premise liability (for example, tripping on the carpet or falling off a chair in the waiting-room) or educational liability (as when supervising a resident). Note that coverage is usually excluded for intentional torts, for example, assault and battery; or criminal activities, for example, Medicare fraud. Punitive damages are also typically excluded from coverage.

Virtually all policies nowadays are "claims made," which means coverage ends once you are no longer insured with the company, irrespective of when the alleged negligent act occurred. In order to maintain indemnification, you will have to buy "tail coverage" to protect you from a lawsuit arising from a past event but filed after your policy has lapsed, for example, in retirement or following relocation. The lag period between the expiration of the insurance policy and the bringing of suit is termed the "tail."

The term "nose coverage" is used instead to describe prior-acts coverage when a doctor applies to another insurer for a new policy. By definition, claims-made policies cover claims that are filed for incidents that both occur and are reported while the insurance policy is in force. In contrast, an "occurrence" policy is one in which the doctor is covered for all malpractice allegations, irrespective of when the lawsuit is brought. In a group practice, contractual terms regarding professional liability should specifically mention tail coverage.

Malpractice premiums vary greatly from state to state, and even among locales within a given state. Premiums are specialty-dependant, with the highest in risky specialties such as obstetrics and neurosurgery.

Primary care physicians are considered a relatively low-risk group. For example, the Medical Insurance Exchange of California, commonly known as MIEC, classifies family practitioners and general internists as class 4 physicians (out of 14 classes – the highest number signifying the riskiest). Discounts are generally available to the doctor who is new in practice, as well as for part-timers who practice less than 20 hours a week. On the average, internists in metropolitan areas pay an annual premium of $12,000 for a $1 million/$3 million claims-made policy – although an average figure is largely meaningless, because premiums are heavily influenced by the practice locality.

Insurance rates vary widely, and figures tend to be skewed to the high side whenever metropolitan data are used to define the state average. In addition, the numbers do not always represent annual premiums for a $1 million/$3 million claims-made policy. In some states, the limits may be lower, for example, $200,000/$600,000, and doctors pay a surcharge for excess coverage. Indiana, Kansas, Louisiana, Nebraska, New Mexico, Pennsylvania, South Carolina, and Wisconsin are examples of such states.

In 2012, the highest annual premiums for internists were in Florida ($47,000), Illinois ($40,000), Michigan ($35,000), Connecticut ($35,000), and New York ($34,000). The lowest rates were seen in Nebraska, Minnesota, South Dakota, Wisconsin, and California (all less than $4,000 per year). States with effective tort reforms, such as California, generally have lower rates.

Happily, premiums have been falling in the last 5 years, according to Medical Liability Monitor, a trade periodical. The Doctors Company and other carriers have reported that claims have halved over the past decade. The severity of claims, however, has continued to climb, with the occasional multimillion-dollar loss.

Overall, some 42% of surveyed physicians in 2007-2008 have had a malpractice claim filed against them, although most claims are dropped or decided in the doctor’s favor. Claims were reported by about 35% of family practitioners and general internists, while surgeons and obstetricians-gynecologists have higher rates, at 70%. Pediatricians and psychiatrist score the lowest, at around 20%.

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