Policy Language

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Defense Costs

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What you need to know about Defense Costs is there is an “Inside” and “Outside”. Outside means your defense costs do not erode the limits of liability. Inside is when the defense costs are within the limits of your liability.

 

As an example- if your policy limits are $1 million per occurrence and $3 million aggregate and your defense costs for a case are $100,000, you would still have $1 million to cover a potential award for that claim.

 

Incident Reporting
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Incident Reporting is when the physician is allowed to report to the carrier a potential claim. Under a claims-made policy the incident must BOTH happened AND reported while the policy is active.

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As an example- if a surgeon has an unfavorable outcome and the patient seems extremely upset, the physician can report this to his carrier, and if the claim trigger is incident, it would be considered a claim.

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Consent to Settle
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Consent to settle clause is when the carrier is required to obtain your written permission to settle a claim against you. If you do not obtain this clause then they can settle a claim without your permission.

 

A hammer clause is when the insurance company must obtain your written permission to settle a claim against you BUT you are responsible for all costs exceeding the settled amount on the agreement. If you win then it will not become a part of your claims history, but if you lose then you will have to pay the difference between the amount of money the case could’ve been settled for and the actual costs of award and extra defense.

 

As an example - a physician has medical malpractice insurance through a different carrier that uses a hammer clause. If the physician finds him or herself with a claim of $250,000 against them. Then they fight the lawsuit and the resulting damages and costs exceed the original amount settled on policy $20,000 then the physician will be obligated to pay all costs exceeding $20,000.

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Exclusions
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Exclusions of an insurance policy states what the policy WILL NOT cover.

 

As an example- Most individual practitioner’s policies specifically exclude coverage for duties as a “medical director.”

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Limits of Liability
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Limits of Liability is what the insurance company will pay on our behalf in the event of a claim.

 

As an example- If your limits of liability are “$1,000,000 / $3,000,000” it would mean that the insurance company would pay a maximum of $1 million per occurrence and $3 million per year for claims.

 

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Tail Coverage 

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Overview

 

The extended reporting endorsement also known as “tail” is one of the most important variables between policies to consider.

 

A claims-made policy will only cover you if the incident happened while the policy was active, after your “retro- active” date, AND was reported to the carrier while the policy was in force.

You must purchase either “tail” coverage from your current carrier or “nose” coverage from the new insurance carrier. When you purchase “tail” from your current carrier this converts your claims-made policy into an occurrence policy because it allows you to report claims in the future to that carrier even when the policy period has ended. When you purchase “nose” coverage this allows you to transfer your existing retro-active date to your new insurance carrier which eliminates the need from purchasing tail coverage from your last carrier.

 

Most physicians we work with are not sure what we mean by retro-active date when we collect their information. Your retro-active date is the first day you became insured by a claims-made policy. That date will follow you for the rest of your medical career in most cases.

 

Examples

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“Claims-made policy”- you buy a claims-made policy in 2010 and renew it every year. You treat Client X from 2011 to 2012. In 2014, Client X decides to sue for the services you provided in 2011 and 2012. You are covered because: 1) you are continuously insured up to when the claim is made and 2) the treatment was provided after the policy started in 2010.

 

“Occurrence policy”- you buy a policy in 2010, treat Client X in 2011 and terminate the policy 2012. In 2015, Client X sues you for an incident that occurred in 2011. You are covered, because you were insured when you treated Client X. With an occurrence policy, it does not matter if you are covered when the suit is brought.

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Free Tail Coverage
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You will be offered free tail coverage if the physician has been insured by that carrier for 5 years and is at least 55 years of age upon permanently retiring from the practice of medicine or has been insured by the company for 10 or 15 years and is younger than 55.

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Insurance Companies 
 
Admitted Carriers
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Admitted carriers are carriers that are licensed and regulated by a State Department of Insurance. The policyholders are protected by the State’s “Guarantee Fund” which offers some protection against the insurance company becoming “insolvent”.

As an example - A carrier goes to the State’s Department of Insurance to admit its policyholders.

 

Non-Admitted Carriers
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Non-admitted carriers are usually the best option for “higher-risk” practitioners. An E & S carrier or non-admitted carrier is not regulated by the State’s Department of Insurance which means they are not subject to the “guarantee” fund. Your State’s Department of Insurance must approve the E & S to be a viable option for you.

 

As an example - the State Department of Insurance must approve the E & S carrier for that state.

 

Premium Discrepancies
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Premium discrepancies exist because there are large differences in premiums. Company premiums will look for the best carrier based on the physician’s location and the specialty. Chateau Insurance Group matches each physician to the company in their area that best meets their criteria. This sometimes means there are companies that they will not recommend to you even when the premiums are lower. When you receive a proposal, you will find a list of company premiums that will include companies with lower premiums that were not recommended and an explanation will be included. We can always provide coverage even when the company is not recommended.

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The scenario above occurs when the company has no proven track record regarding medical malpractice insurance in a specific state or region enters the market. These companies will begin soliciting for business offering low premiums but when you want to renew your policy they will greatly increase your premium or leave the State.

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As an example - They will find you the best company based on your specialty and location.

 
A.M. Best Ratings
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A.M. Best Ratings evaluates the financial health of insurance carriers.

As an example- “A-“ or better is a desirable rate for a carrier.

 

Claims 
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Incident Reporting
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Incident Reporting is when the physician is allowed to report to the carrier a potential claim. Under a claims-made policy the incident must BOTH happened AND reported while the policy is active.

As an example- if a surgeon has an unfavorable outcome and the patient seems extremely upset, the physician can report this to his carrier, and if the claim trigger is incident, it would be considered a claim.

Causation
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Causation is when the incorrect actions of the health care provider probably led to or contributed to the injuries and damages suffered. 

To prove a medical malpractice case, in a case involving the negligent failure to diagnose cancer, if there was less than a 50% chance that earlier diagnosis would have affected the outcome, there is only a “possibility” and not a probability. The law does not permit recovery of damages based on a “possibility.”

As an example- “no causation” would be a person who receives an incorrect prescription from the pharmacist and realizes the mistake before she takes the medicine. However, if the medicine were actually taken, and harm resulted, there is “causation.”
 

Damages
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There are two categories of damages: Economic and Non-economic.

Economic damages include out-of-pocket losses that have monetary value, such as lost earnings ad medical bills.

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Non-economic damages are known as “pain and suffering” damages. It is compensation for physical impairment or disability, or the diminished enjoyment of life caused by the malpractice.

As an example-

Economic damages - lost earnings or medical bills

Non-economic damages - receiving compensation due to a trauma

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Policy Types 
 
Overview
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There are two different types of policies: Claims-made and Occurrence coverage. Claims-made policies are the most common type available to physicians today. Claims-made policy covers incidents that happen during the policy period (on or after the retro-active date) AND are reported while the policy is still in force. Occurrence coverage covers incidents that occur during the policy period regardless of when they are reported as claims.

Examples

 

Claims-made - For example, a claim that is incurred in 1997 but is not reported until 1999 will be covered under the claims-made policy issued for 1999 (assuming the policy is continuously in force with a prior acts date of 1997 or previous).

Occurrence coverage - For example, an occurrence policy written for 1997 covers only claims arising out of incidents which occur in 1997 irrespective of when the claim is actually made.

 
Claims-Made
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A claim-made policy covers incidents that occur during the policy period (on or after the retro-active date) AND are reported while the policy is still in force.

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For example, a claim that is incurred in 1997 but is not reported until 1999 will be covered under the claims-made policy issued for 1999 (assuming the policy is continuously in force with a prior acts date of 1997 or previous).

Occurrence
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An occurrence policy covers incidents that occur during the policy period regardless of when they are reported as claims.

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Example - For example, an occurrence policy written for 1997 covers only claims arising out of incidents which occur in 1997 irrespective of when the claim is actually made.

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Obtaining Coverage 
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Application Process
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The application process is different from each insurance company but generally the following would be helpful to provide:

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• Completed Application

• Letterhead

• Curriculum Vitae

• Copy of Medical License

• Copy of DEA License

• Previous or Current Policy Declaration Page

• A copy of an advertisement (if available)

• Loss History Reports for all insurance companies you have been with for the last 10 years.

 

It is important to provide as much of this information as possible and to be truthful on the application so that the insurance company is aware of exactly what you do and you get the coverage that you need.

 

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Premium Discrepancies
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Premium discrepancies exist because there are large differences in premiums. Company premiums will look for the best carrier based on the physician’s location and the specialty. Chateau Insurance Group matches each physician to the company in their area that best meets their criteria. This sometimes means there are companies that they will not recommend to you even when the premiums are lower. When you receive a proposal, you will find a list of company premiums that will include companies with lower premiums that were not recommended and an explanation will be included. We can always provide coverage even when the company is not recommended.

​

The scenario above occurs when the company has no proven track record regarding medical malpractice insurance in a specific state or region enters the market. These companies will begin soliciting for business offering low premiums but when you want to renew your policy they will greatly increase your premium or leave the State.
 

As an example - they will find you the best company based on your specialty and location.

 

 

Miscellaneous 

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National Practitioner Data Bank
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Each company that makes a payment on behalf of a physician, dentist or other health practitioner in settlement of, or part of a claim or judgment against that practitioner must report the payment to the National Practitioner Data Bank (NPDB).

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Medical Malpractice

 

Malpractice is another word for “Negligence”

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Medical Standard of Care

 

If the medical standard of care is questionable then the Health care providers are required to use that degree of learning and skill ordinarily used under similar circumstances by reputable and careful members of the profession.

Example - a surgeon’s actions are questioned, another surgeon must testify that the doctor being sued failed to do something that he should have done, or did something which he should not have done.​​

Expert Witness

 

If the subject matter is not commonly understood by ordinary people then evidence will be offered by someone with specialized knowledge and experience this is called an “expert witness”.