Part 3 of 3

If you read the previous two installments, you now know that one of the most important items to question and study when considering a Locum Tenens company is their malpractice insurance coverage.  The following will help you understand the basics and will identify several key items to watch for.

To better understand what you need in a policy, it helps to understand the market.  Mergers, rising claim payouts and the changing economy have caused changes in many major insurance companies, including a decrease in ratings and questionable financial stability.  Several major carriers have left the market and others are limiting new policies or increasing premiums dramatically.  Malpractice advisors suggest you do not accept policies from any company that has less than a B+ rating by A.M. Best.

Expect comprehensive Malpractice Insurance from a strong carrier.

Additionally, be wary if the Locum Tenens company tells you the insurance is being provided by their client rather than themselves.  This may leave you with a policy that is written by a weak provider that no longer exists just when you need them.

Once you know you have a solid company, with a good rating, what should you look for?

Well, the two basic forms of professional liability insurance are Occurrence Form and Claims Made Form.  There are substantial differences between these 2 most common forms of medical malpractice insurance.  Claims-Made policies are the most common type available to physicians today.

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 future claims costs in today’s medical malpractice environment—occurrence policies have become nearly extinct for medical malpractice coverage.  If told this is the type provided, always ask to see the policy. Terminology today can be very misleading and many physicians believe they have an Occurrence Form policy when they actually have Claims Made.

Claims Made Form policies provide coverage for claims that are reported during the policy period. However the provider is not covered for claims made after the policy expires, unless a Tail Policy' is purchased. There are insurance companies offering Claims Made policies that are no longer writing Tail Coverage. There are no guarantees that "Tail Coverage" will be purchased by the locum tenens company. No law exists that compels companies to buy tail coverage.

Tail Policies vary in the length they are in effect and can provide coverage one year from the end of the policy to an unlimited time period. They can also vary in the amount of coverage provided. Some tails provide less coverage than the original policy. An important element of a Tail Policy is the aggregate amount it will pay out over the life of the tail. This should be at least as much as the original policy.

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 a new 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 a 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.

YOU CANNOT OVER-EMPHASIZE THE IMPORTANCE OF YOUR RETRO-ACTIVE DATE.

Most physicians are not sure what is meant by “retro-active” date.  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.

Confused yet?  Don’t worry if you are.  These are just the basics and they can be baffling.  Remember that if you are unsure about what you are getting, ask to take a copy of the locum tenens company’s policy to an insurance broker you trust and have it reviewed.  If you are still awake and haven’t gotten a headache by this point, there are a few more items to consider.

The best interests of the insurance company ARE NOT ALWAYS the same as YOUR best interests.  You should try to insure the policy comes 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. If the 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 the 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 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.”

Finally, 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.”  You should study very carefully the exclusions of your current and any future professional liability insurance policy.

These items seem complicated, but if you can make sure they are in your policy, you will be insured of a safe locum tenens experience. 

We hope this series has helped you better understand the rich and rewarding experience that can be achieved from Locum Tenens.  The Locum Tenens companies that you find inside DocCafe.com are always available to answer your questions and help you decide if it is right for you.

Good luck and happy travels!