The “tail” (extended reporting endorsement) provisions are among the most important variables between policies to consider.

Because a claims-made policy will only cover you if the event happened while the policy was in force (after your “retro-active” date) AND was reported to the carrier while the policy was still in force — you cannot just leave your current carrier and start over with anew insurer!

You need to either purchase the extended reporting endorsement (“tail”) from your current carrier OR purchase prior acts (“nose”) coverage from the new insurance carrier. Purchasing tail coverage from your present carrier 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. If you purchase tail coverage from your current insurer and start over with a new insurance company you will have to new retro-active date.

Prior acts (or “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. It is usually less expensive to obtain prior acts coverage from the new company than to buy tail coverage from the old carrier and then purchase a first year claims-made policy from the new company.

We cannot over-emphasize the importance of your retro-active date. Most physicians we work with are not sure what we mean by retro-active date when we are collecting 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.

Many insurance companies offer free tail coverage if a physician has been continuously 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 continuously insured with the company for 10 or 15 years and is younger than 55 when he/she retires.

An insurance company that is licensed and regulated by a State Department of Insurance is known as an “admitted” carrier 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 protection against the insurance company becoming “insolvent.” Check with your state’s Department of Insurance for details of it’s guarantee fund and for a list of the malpractice insurers which are “admitted”.

Often, a physician simply cannot obtain coverage from an admitted carrier because of past claims history, licensing issues, or high-risk procedures in the doctor’s practice. For example: In some States – Bariatric Surgeons will be declined coverage from every admitted carrier in that State.

Excess & Surplus Lines (non-admitted) Carriers usually become the best option for so called “higher-risk” practitioners. An E & S carrier is not regulated by the State’s Department of Insurance and therefore, is not subject to the “guarantee” fund. However, your State’s Department of Insurance must approve the Excess & Surplus Lines Company for it to be a viable option for you.

In most cases large differences in premiums exist because the physician simply does not have coverage with the right carrier for their specialty. Various companies prefer different specialties as a result of their success in defending claims for those particular specialties. When a physician elects coverage with the company best suited for that physician’s specialty and geographical location, it results in very competitive premiums. Diederich Healthcare matches each physician to the company that best meets this criteria, from among those companies that are established in your area. This sometimes means there are companies that we will not recommend even when their premiums are lower. You will find that upon receipt of a proposal if this has occurred the listing of company premiums will include companies with premiums lower than that recommended. A complete explanation will be included. In the event you wish to obtain coverage with a company, notwithstanding our recommendation, we can always provide coverage.

The above situation occurs when a company having no proven track record regarding medical malpractice insurance in a particular state or region enters the market. These companies begin soliciting for business offering low premiums; however, from experience we find in such situations that at your next renewal these companies either greatly increase your premium or leave the State. If you transfer to such a company and experience a major lawsuit it is possible that you would not be able to return to a proven standard company at your next renewal.

The financial strength of your insurance company is a very important consideration. AM Best is the most widely used company to evaluate the financial health of insurance carriers. If possible, an AM Best rating of “A-” or better is desirable for the carrier you choose for your professional liability coverage.

How each insurance company defines a “claim” is another important consideration when comparing policies.

“Incident reporting” allows the physician to report an adverse outcome to the carrier as a potential claim. This is important because for a claim to be covered under a claims-made policy, the incident must 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 – then 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.”

Causation means that the incorrect actions of the health care provider probably led to or contributed to the injuries and damages suffered. For example, if an emergency room doctor did not quickly examine a patient, it could be a life-or-death situation. However, if the patient would have died, regardless of anything a doctor might have done, then there would be no “causation,” even if the doctor delayed his examination. Another example of “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.”

To prove a medical malpractice case, it must be probable that the incorrect treatment caused the harm. In this context, “probability” means that it is “more likely than not” that the treatment caused the harm. The plaintiff must prove that there was more than a 50% likelihood that the harm was caused by the negligence. For example, 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.”

Damages are divided into two categories: economic and non-economic. Economic damages include out-of-pocket losses that have ascertainable monetary value, such as lost earnings and medical bills. If the loss can be replaced with money, it is “economic.” Non­economic damages are typically known as “pain and suffering” damages. It is compensation for physical impairment or disability, or the diminished enjoyment of life caused by the malpractice. If the malpractice resulted in a patient’s death, the damages include compensation for the lost financial support that the spouse and family would have received, and compensation for the loss of the decedents care, comfort and love.

Claims-made vs. Occurrence Coverage: There are substantial differences between the 2 most common forms of medical malpractice insurance. Claims-made policies are the most common type available to physicians today.

Occurrence policies cover claims on the basis of when they are incurred regardless of when they are reported. 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 policies cover claims on the basis of when they are reported. 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).

A claims made policy covers events that occur:

1. During the policy period (on or after the retro-active date) AND
2. Are reported while the policy is still in force. If you would like the company that you have claims-made coverage through to cover your claims after the policy is not longer in force, tail coverage is required (discussed in another section).

An occurrence policy covers events that occur during the policy period regardless of when they are reported as claims. Because it is nearly impossible to predict the cost of future claims in today’s medical malpractice environment, occurrence policies have become nearly extinct for medical malpractice coverage.

Different insurance companies will have different requirements, but generally it is helpful to provide the following:

• 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.

Discover why so many physicians look to DiederichHealthcare for their professional liability insurance solutions. DiederichHealthcare has been a leading provider of medical malpractice insurance for physicians for more than thirty years. Our goal is to deliver cost effective, quality insurance protection to our physician clients. The highly acclaimed staff of DiederichHealthcare understands the difficulties physicians are experiencing. Moreover, they work diligently for physicians to develop solutions. It is important for you as a prospective physician client to understand exactly what we can do for you.

DiederichHealthcare provides consultation on which coverage from any carrier which offers medical malpractice insurance to physicians. This allows us to focus on developing a program which bests suits your individual needs as compared to only offering one carrier. This eliminates many of your hassles by providing you the opportunity to explore all options by using us as a single source.

DiederichHealthcare’s network of over two-hundred contracted insurance affiliates assures physician clients greater portability, market accessibility, and effective consultation. This network further enhanced by our nationwide services and offices in Atlanta, Georgia; Austin, Texas; Berwyn, Pennsylvania; Carbondale, Illinois; Chicago, Illinois; Cincinnati, Ohio; Denver, Colorado; Las Vegas, Nevada; Lexington, Kentucky; Marion, Illinois; Portland, Oregon; St. Louis, Missouri; Sacramento, California; Springfield, Missouri; Tampa, Florida; Tulsa, Oklahoma.

DiederichHealthcare is constantly monitoring legislation and analyzing marketplace conditions seeking viable, long term, stable, opportunities to deliver to our clients. This continual evaluation is daunting and necessary to protect physicians, as well as our organization, from unscrupulous short-term opportunities. This process is lead by our senior management in conjunction with in-house general counsel. This is a vital service DiederichHealthcare provides its physician clients.

DiederichHealthcare, prior to each policy renewal, and more frequently based on market/situational changes, reviews each account and policy by conducting a thorough analysis of the physician client’s policy(s) to determine options for renewal coverage. These options are then presented to the physician with our recommendation. This is accomplished prior to renewal in order to avert last minute decision making.

In most cases large differences in premiums exist because the physician simply does not have coverage with the right carrier for their specialty. Various companies prefer different specialties as a result of their success in defending claims for those particular specialties. When a physician elects coverage with the company best suited for that physician’s specialty and geographical location, it results in very competitive premiums. Diederich Healthcare matches each physician to the company that best meets this criteria, from among those companies that are established in your area. This sometimes means there are companies that we will not recommend even when their premiums are lower. You will find that upon receipt of a proposal if this has occurred the listing of company premiums will include companies with premiums lower than that recommended. A complete explanation will be included. In the event you wish to obtain coverage with a company, notwithstanding our recommendation, we can always provide coverage.

The above situation occurs when a company having no proven track record regarding medical malpractice insurance in a particular state or region enters the market. These companies begin soliciting for business offering low premiums; however, from experience we find in such situations that at your next renewal these companies either greatly increase your premium or leave the State. If you transfer to such a company and experience a major lawsuit it is possible that you would not be able to return to a proven standard company at your next renewal.

Each entity that makes a payment on behalf of a physician, dentist or other health practitioner in settlement of, or in satisfaction in whole or in part of a claim or judgment against that practitioner, must report the payment to the National Practitioner Data Bank (NPDB). Medical malpractice payments are limited to exchanges of money and must be the result of a written complaint or claim demanding monetary payment for damages.

Malpractice is another word for “negligence” which means that a health care provider did not measure up to the standard of care expected of reputable and careful health care providers under similar circumstances. If the malpractice caused harm, a lawsuit or claim may be filed to recover damages for the harm that was suffered.

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. If, for example, a surgeons 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.

If the subject matter is not commonly understood by ordinary people, then evidence may be offered by someone with specialized knowledge and experience. This person is called an “expert witness.” In most medical malpractice cases, the plaintiff cannot prove the case unless an “expert” testifies regarding the issues of “standard of care” and “causation.”

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. 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. 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.

How each insurance company defines a “claim” is another important consideration when comparing policies.

“Incident reporting” allows the physician to report an adverse outcome to the carrier as a potential claim. This is important because for a claim to be covered under a claims-made policy, the incident must 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 – then 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.”

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.

The exclusions of an insurance policy state what the policy WILL NOT cover. For example: Most individual practitioner’s policies specifically exclude coverage for duties as a “medical director.” Your should study very carefully the exclusions of your current and any future medical malpractice insurance policy.

Your limits of liability are what the insurance company will pay on your behalf in the event of a claim. 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. For further clarification, refer to the examples below and assume limits of liability of $1,000,000/$3,000,000:

In one year you have 4 lawsuits each for $800,000:
The insurance company pays $3.000,000 and you are responsible for $200,000.

In one year you have 2 lawsuits each for $2,000,000:
The insurance company pays $2,000,000 ($1 million each) and you are responsible for $2,000,000 ($1 million each).

In one year you have 9 lawsuits each for $20,000:
The insurance company would pay everything.

So, depending on your individual risk – there are a wide variety of limits of liability available that may be an attractive option. However, please note that most states have minimum requirements for limits of liability should you have hospital privileges.