FAQs

This section refers to frequently asked questions about malpractice insurance.
Please contact us if you have any additional questions.

1. There are two forms of medical malpractice insurance. Claims made vs. Occurrence.
   Most carriers now a days only offer a "claims made" policy.
   

   Claims-Made:   policy covers events that occur During the policy period (on or after the “retro-active” date) AND Are reported while the policy is still in force. (See “tail” coverage section later for further clarification.)
   Occurrence:  policy covers events that occur during the policy period regardless of when they are reported as claims.—occurrence policies have become nearly extinct for medical malpractice coverage.

2. When changing from one insurance company to another, it is very important to either  purchase a "Tail" coverage or make sure that your new carrier will provide you "Retro-Active or Nose" coverage going back to the date that you previously had continuous coverage
   
   Extended Reporting (“Tail”):  
   "Tail" coverage is typically purchased from your current carrier, how ever we do offer sources of "tail coverage from different carriers.
   Purchasing tail coverage effectively converts your claims-made policy into an occurrence policy because it allows you to report claims in the future to that carrier even though the policy period has ended.
   
   Prior Acts (“Nose”) Coverage or "Retro-Active Date:
   Prior acts (“nose”) coverage allows you to transfer your existing retro-active date to your new insurance carrier—eliminating the need to purchase tail coverage from your last carrier.  In most cases it is much more expensive to purchase "tail" coverage from your current carrier than it is to purchase prior acts ("nose") coverage from the new company.
3. Consent to Settle Clause & “Hammer” Clause:  
   The best interests of the insurance company ARE NOT ALWAYS the same as YOUR best interests.  You should try to obtain a policy with a “consent to settle” clause which requires the carrier to obtain your written permission to settle a claim against you.  If not, the carrier can settle a claim that you believe is very defensible without your permission.
   
   A “Hammer” clause is one in which the insurance company must obtain your written permission to settle a claim against you BUT YOU ARE RESPONSIBLE for all costs exceeding the amount of the settlement proposed by your carrier if you will not agree to that settlement.  If you push the case to trial and you win—you avoid having the proposed settlement becoming a permanent part of your claims history.  But if you lose—you will have to pay the difference between the amount of money the case could have been settled for and the actual costs of awards and extra defense. Keep in mind that most carriers will offer discounted rates for a policy without a "Hammer" Clause
4. Defense Costs “Inside” vs. “Outside Policy Limits”:
   If your policy pays defense costs “outside” the limits of liability then your defense costs do not erode the limits of liability of your policy. 
   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.  If your policy pays defense costs “inside” the limits of liability then you would have only $900,000 left to cover a potential award in the previous example.  Clearly—it is preferable to purchase a policy with defense costs “outside” the limits of liability.
5. How each insurance company defines a “claim” is another important consideration when comparing policies. 
   Incident Reporting vs. Written Demand for Damages:  
   “Incident reporting” allows the physician to report an adverse outcome to the carrier as a potential claim.  This is important because remember that for a claim to be covered—a claims-made policy requires that the incident BOTH happen AND be reported as a claim while the policy is in force!   
   
   If an insurance company requires that the insured receive a “written demand for damages” in order to consider a claim to be reported—than the physician must wait to be sued before the claim is recognized!  This can be a real problem for physicians wishing to change professional liability carriers:  Most insurance companies would decline to offer a policy to prospective clients who can expect to be sued in the future for past adverse outcomes.  The carriers often consider such a situation to be the same as “buying future claims.”
6. In our opinion, don't let the the word non-admitted discourage you, the best way to see if a company is viable is to make sure it is an "A" rated carrier with rating companies such as "AM-Best"
   “Admitted” Carriers vs. “Excess & Surplus Lines (‘Non-Admitted’)” Carriers: 
   An "Admitted" insurance company that is licensed and regulated by a Department of Insurance in that State.  Because the company is “admitted” its policy holders are protected by the admitting State’s “guarantee fund.”  This fund affords policyholders some very minimal protection against the insurance company becoming “insolvent.”
   
   Often, a physician simply cannot obtain coverage from an admitted carrier because of the scope of practice,  past claims history, licensing issues.
   
   Excess & Surplus Lines (“non-admitted”) Carriers   are not regulated by the State’s Department of Insurance and therefore, are not subject to the “guarantee” fund.  However, all Excess and Surplus Lines written within a state are approved by the department of insurance, proving that they are also a viable option.
7. Shopping the Market—You?  An Agent?  Or A Broker?
   Most physicians or office managers are too busy to adequately shop the complex medical malpractice insurance market by themselves. The ones who do attempt to do so usually do not have the knowledge and experience necessary to achieve the best and most economical protection for themselves.  Do yourself a favor—enlist the services of an insurance professional to assess your particular situation to find the best medical malpractice insurance for your needs.
   
   "Agents" usually represent one insurance company and only provide quotes for one company where as "Brokers" represent multiple companies and are representatives of their clients.
   
   Ideally it would probably be in your best interest to use a Broker that has access to multiple markets and can give you more of an un-biast perspective compared to an Agent that will provide you quotes from their one carrier.
   
   Insurance Company Rating:   Make sure that the insurance company you plan to obtain coverage from is a stable, reputable and rated carrier. One way to check the stability of an insurance company is to check rating sites such as AM-Best. These sites will let you know how your malpractice insurance company is rated. Always try to go with an "A" rated insurance company.
   Risk Retention Groups or RRG's
   There are also companies such as "RRG" or Risk Retention Groups. In our opinion these companies never last the long haul of time and should be avoided, this would not be the best place to place your risk. The only time we would consider a "RRG" for our clients is If you have already exhausted all your options and an "RRG" is the only and final option.
8. Use the services of only 1 broker:
   For the best results, obtain only one broker to represent you to each insurance carrier. If you call several brokers to obtain quotes for you—without letting them know which companies your application has already been submitted to—they will invariably get in each others way and dramatically slow down the process. This creates additional work for both the broker and insurance company,  No one likes to do double work. The insurance carriers will not look favorably upon a physician whose application has been submitted by several brokers.