There are a lot of considerations MD’s need to make when it comes to medical malpractice insurance coverage. Here are 7 of the BIGGEST mistakes to avoid.

1. Performing procedures that you are not covered for, and/or neglecting to state the procedures you are performing in the Medical Malpractice application procedure list. 

The insurer may deny or cancel your coverage for the false statement. The procedure(s) that you mark is the only procedure(s) that the insurer is covering. To avoid the denial of coverage or cancellation, take your time and read every line on the form.

Do NOT deviate unless you contact your insurer prior to doing the new procedure(s), and obtain written confirmation that it is now covering you. Never assume anything. If you have any questions—ask!

2. Beware of Surgical Brokers, who are professional marketers on the Web hustling to attract patients for cosmetic procedures.

The patient assumes the surgical broker’s site is a real doctor’s site and will correspond with the surgical broker telling him/her what he/she wants done. The surgeon is now exposed to vicarious liability, where you are sued since a patient can logically assume that you are related businesses, and thus part responsible for anything the surgical broker says or does.

3. You are your Brother’s Keeper.

Think carefully about renting space to another MD., or hiring one. Having separate names on the door and business cards does not protect you from the public assuming that you have related entities. This is called vicarious liability.

For Example:

OB Dr. P rents space to another OB, Dr. X.

Dr. X is sued

The defendant names Dr. P, since the patient assumes they are related entities.

Dr. X had inadequate malpractice insurance and his insurer denied coverage.

Dr. P’s medical malpractice insurer denies the claim since he did not have his coverage properly set up for this risk.

Dr. P is left with a claim on his record, and he spends over $25,000 getting himself off the claim.

4. Not maintaining your retro date when changing insurers or not buying tail. Gaps cost more in the long run.

Most medical malpractice insurance is claims made, which means the coverage has to be made on, or after the retroactive date and while the policy is current.

Example A:

Dr Sanchez, OB, has a med mal policy that has a retro date of 9/07/05. If he is sued today, 9/24/09, for something that happened on 11/06/05 involving the birth of a child what happens?

Result: He is covered (assuming it is an eligible claim) since his coverage goes back to his retro date and this claim happened after his retro date of 9/07/05.

Example B:

Dr Sanchez has had a bad year and he wants to save money on his malpractice insurance this year.

He decides to renew his malpractice insurance with no retro date. He has his new coverage cover him for claims that occur from the renewal effective date going forward, not going back to 9/07/05, which is his old retro date.

This is called the retro inception date where the retro date is the same as the inception date. This is a much cheaper coverage since it is more limited. The doctor saves $15,000. He drops the coverage that was retroactive to 09/07/05.

Result:

His coverage is denied for something that happened on 11/06/05 involving the birth of a child, since he dropped his retro date. A year later he tries to apply to the Standard malpractice market to save money.

The Standard Market is comprised of Medical Malpractice insurance companies that are regulated by the government and offer the lowest prices insuring only MD’s with favorable risk profiles and have normal practice patterns. (i.e. TDC, Med Pro and Norcalin California). When the Standard Insurer sees that he has dropped his 09/07/05 retro date they decline to insure him.

The reason these insurers decline, like most would in the Standard Market, is that they fear a claim comes up from the past that is before the new retro date and the insurer may be forced by a court to cover that claim. This is called a gap in coverage.

5. Do not be on a constant search for the cheapest deal…

Insurance Brokers shop your insurance, not you. You do not have the time or the knowledge. You do not save money by going directly to the insurer. Few will talk directly anyway.

The following things are what you should communicate and expect from your broker:

• Hire one broker. More brokers do not help, they hurt you since one broker will say one thing about your risk to an insurer and another will say something else.
• Beware of doing business with an unscrupulous broker who preys on your “got to have the cheapest deal syndrome.” He will cut your coverage to provide the cheapest deal. You will not know this until you have an uncovered claim or worse.
• Ask for quotes or decline letters from all the malpractice insurers.

We submit our Non Standard malpractice clients to the Standard market every year and sometimes they get in within the first try or the sixth try. Regardless of however many tries, it is worth it when they do get in. We met an FP OB paying 147k a year in the Non Standard market. We got him accepted by a Standard Insurer for 45k. His broker did not even submit him to the standard market.

• Ask your broker to give you a list of insurers that he/she will shop for you. 5 or 6 should be fine. If he/she is a pro then he/she will know the best deals for your specialty and risk profile.
• If you are in the Standard market, ask your broker each year if any of the other Standard Insurers have lowered their rates. Otherwise, stay put! You have the best deal. Note: Standard insurance companies rarely change their rates.
• If you are in the non-Standard market, ask your broker to shop for all the Standard Insurers till you are accepted by one.

6. Check the AM Best Rating of your insurer upfront and periodically Ambest This is the industry rater for insurance companies. It’s not fool proof, but it is considered good at evaluating the financial strength of the medical malpractice insurer.

• No AM Best Rating = DO NOT BUY!
• A’s only A-, A, A+, A++
• Never B category or lower, they tend to go out of business, not worth the risk
• Do some research on the insurance companies

 7. Buying from a Risk Retention Group without knowing the risks or the other alternatives to insurance companies.

Risk Retention Groups:

• Insuredsor policyholders who have banded together to form a federally chartered insurance company to share risk with each other.
• Regulated by the federal government and are exempt from state regulation.
• Federal law requires that they be licensed in one state (state of domicile).
• Can only raise capital from policyholders. They have no means to borrow or raise capital on their own.
• Each policyholder has joint and several liability for the risks assumed and the losses developed by the RRG.
• If premiums collected are inadequate to pay claims, each member is assessed.
• For Example: If the RRG is short 10 million dollars and you are one of the 500 members of the RRG, you must pay on demand $20,000 on top of the premiums you already paid. This is made explicit under Federal law, and the amount of assessment is unlimited.
• Groups may say that they are not assessable, but this is not accurate. If the premium is inadequate to pay losses:
• Members may pay “voluntary assessments” to offset premium shortfall or
• RRG will enter bankruptcy and a Federal bankruptcy judge will determine what assessment amount may be needed.

Considerations Before Moving Your Malpractice Coverage

1. Make sure your retro date is maintained on new quotes for coverage.
2. Ask if defense, in addition to the limits, is available. A $1 million limit may not be enough if defense is included within the limit.
3. Deductibles above $10,000 can cost more than they save.
4. Check the AM best rating.
5. Ask for a complete copy of the policy and all endorsements. Pay special attention to what is not covered.