Recently, we had a prospect who was a surgeon in the standard insurance market (Medical Malpractice insurance companies that offer the lowest prices and best coverages for MD’s with favorable risk profiles). He had been insured with them for several years and was in line for free tail (when he retires he pays nothing for lifetime prior acts coverage).

His Bookkeeper was always paying bills late to maximize cash flow, including his medical malpractice insurance. Expenses were exceeding revenue, and the bookkeeper kept ignoring the late notices/cancellation notices from the medical malpractice insurance company.

Eventually the insurer issued a final cancellation notice. While this was happening, the doctor had a minor criminal conviction, unrelated to quality of care, thus his license was put on probation.

We intervened with the insurer who checked the doctor’s license and probation, but decided not to reinstate him for that reason. It is easier for an insurer to not reinstate an MD who was canceled, than to cancel his insurance at renewal. Normally this doctor more than likely would have been renewed even with his licensing probation, since he had no claims and was a clean risk. He is now out of the standard market.

We scrambled, but no other standard insurers would take him for his med mal insurance. He has lost his prior acts coverage, so any claims prior to the cancellation that are made now are not covered. The non standard insurers quoted a $10K deductible for his medical malpractice insurance, which he never had with his former insurer. He has no free tail therefore it will cost him 2 to 3 times the annual premium if he wants to retire with tail. He lost his unlimited coverage for defense. Now the defense coverage is inside the limits, and he pays 30% more for his med mal insurance.

When we spoke with the doctor, he had no clue that his medical malpractice insurance was canceled. He fired his bookkeeper and hired us to get him back into the standard insurance market which will take a few years. Meanwhile, he runs the risk of being sued from his past services, with no insurance to protect him because he lost his prior acts.

Doctors, let your bookkeepers or controllers know that the first bill to pay is the Medical Malpractice Insurance bill. You can lay off employees or cut salaries, but pay this bill first and on time. Uncovered medical malpractice claims, due to loss of coverage, can wipe out the practice and possibly your personal assets.

HCP is a medical malpractice insurance brokerage or company, who has a department dedicated to doctors and medical malpractice. We are not a law firm or a CPA. Our main medical malpractice insurance office is Orange County CA.