The majority of professional liability insurance policies today are written on a claims-made basis. That means you, the physician, are protected by the insurance company providing coverage at the time the claim is made against you. The other, less common form is an occurrence policy. This means you, the physician, are protected by the insurance company providing coverage at the time the incident occurs, regardless of when the claim is made.
While these are the two most common policy forms offered in today’s market, there is another form of coverage called a claims-paid policy. Offered only by a few insurers in a limited number of states, claims-paid policies typically provide a cheaper, but more restrictive, form of claims made insurance.
EXAMPLE: A claim is filed against you in September 2014 and is not paid out until December 2015; on a claims-PAID policy, the company is only liable for your claim if you are still insured by them at the time the claim is paid. It does not matter when the incident occurred or when the claim was made.
Let’s use that same example and assume you are on a claims-MADE policy. On a claims-made policy, once reported, your insurance company is immediately liable for your claim regardless of the date the claim is paid out. This allows you to transfer coverage to another insurance company and still have your open claim covered by your previous insurer because they are liable for the claim based on when it was made, not when it was paid.
What does this mean for you? If this is a situation you are in with a claims-paid policy, you can do one of two things:
- Remain on your claims-paid policy until your claim closes (OR)
- Terminate the policy and risk paying out of your own pocket to cover not only defense costs but potential damages from the claim against you.
A potential issue that may arise if you remain with your current carrier is that upon renewal, your insurance company has the ability to increase your assessment based on underwriting discretion and estimation of future financial losses.
Even claims-free physicians on a claims-paid policy can experience a rate increase based on company losses if you have an assessable policy.
Also, if you aware of an open claim and apply for coverage elsewhere, insurance companies will not offer coverage retroactively and defend that claim, essentially leaving you uninsured or “bare” for that time period and open claim.
Some questions to consider:
- Am I on a claims-paid policy?
- Is my policy assessable?
- What can I do if I am claims-free and have an assessable claims-paid policy?
As you can see, there is a significant difference in these coverage types. To help answer these questions and paint a clear picture of your current malpractice insurance situation contact an experienced insurance broker at Diederich Healthcare by completing our short quote form or by calling 800-457-7790.
Source: American Medical Association’s Medical Professional Liability Insurance: The Informed Physician’s Guide to Coverage DecisionsTo contact the author, call 800-457-7790 and ask for Matt Thompson.