MICA is pleased to provide this brief tutorial to help you understand the concepts and terminology of medical professional liability insurance (MPLI).
Medical professional liability results when a health care professional commits an act, error, or omission, which deviates from accepted standards of practice in the medical community and which causes injury to the patient. The first recorded cases of medical professional liability date back to 1374 in England and 1794 in the USA.
Elements of Malpractice
A plaintiff (e.g.: a patient) must establish “elements of malpractice” for a successful lawsuit. While breach of care, injury, and damages are basic elements, the list of elements of malpractice can be expanded as follows:
- Duty of care owed by health care professional due to relationship between patient and healthcare professional
- Standard of care recognized and required
- Breach of that standard of care
- Injury proximately caused by the breach
- Claim by patient (or survivors)
- Damages shown by patient
Allegations in claims (e.g.: lawsuits) against health care professionals include:
- Failure to diagnose
- Inappropriate treatment
- Injuries from therapeutic agents (e.g.: anesthesia, blood transfusions, and drugs)
- Injuries from equipment and premises
- Failure to obtain informed consent
- Wrong site surgery
Health Care Professionals are required to show evidence of MPLI in order to obtain hospital privileges and to contract with HMOs, PPOs and other health insurance companies.
Claims-made coverage: a claims-made policy is triggered by the date of the claim. For example, if a claim that is made today arises from an incident that occurred in 1999, then the claims-made policy that is in force today will be triggered.
Bare practice exposure (gaps): with claims-made policies comes the possibility for “bare practice exposures”. A “bare practice exposure” is a period of time during which a health care professional has no medical professional liability insurance coverage. In other words, a bare practice exposure exists when there is a gap in continuous coverage.
Gaps in continuous coverage can be prevented with the following policy features:
- Incident reporting coverage
- Prior acts coverage
- Extended reporting coverage
Incident reporting: many claims-made MPL policies permit “incident reporting”.
”Incident reporting” is a claims-made policy feature that allows an insured to report “potential claims” to the insurance carrier. Early reporting of incidents may reduce the likelihood of a claim ever being made.
A “potential claim” is a specific incident that a health care professional has reason to believe may give rise to a claim.
Prior acts (nose) coverage: also known as “nose” coverage provides coverage for claims that both (1) are made during the current policy period and (2) arise out of incidents that occurred prior to the effective date of the current policy (but that occurred no earlier than the “retroactive date”).
A “retroactive date” is a specified date in many claims-made policies. It specifies how far back prior acts coverage begins. While some claims-made policies that provide “full prior acts coverage” may not include references to retroactive dates, most medical professional liability claims-made policies do specify retroactive dates, even when full prior acts coverage is granted.
Extended reporting period (tail) coverage: also known as “tail” coverage, is purchased when a claims-made insurance policy is either non-renewed or cancelled. Be sure to know if coverage is “indefinite” (never-ending) or “limited” (e.g.: for one, two, three, five, seven or 10 years).
“Extended reporting period coverage” (ERP) or “tail” provides coverage for claims that both (1) are made after the expiration date of the non-renewed or cancelled policy (but before the ERP ends, if ever) and (2) arise from an incident that occurred during the non-renewing or cancelled policy’s policy period (or during any prior acts coverage period included on that policy).
The structure of an insurance company is an important factor in deciding where to purchase coverage. There are three main types of companies:
- Admitted – an admitted company is licensed by the Department of Insurance (DOI) in each state where it does business. It is regulated by each state’s DOI and must file rates, forms and financial statements with each DOI. Rates and forms generally must be approved by the DOI before they can be used. Admitted companies offer the protection of the state guarantee fund, should the company go out of business and be unable to pay claims.
- Excess and Surplus Lines (non-admitted) – these types of companies are not regulated by the DOI, with the exception of minimum financial standards. Excess and surplus lines companies have generally been utilized for non-standard or hard-to-place risks. These companies do not offer the protection of the state guarantee fund.
- Risk Retention Groups (RRGs) – these companies are minimally regulated by only one state DOI (the domiciliary state). All other states where the RRG operates must accept the DOI regulations of that one state. These companies do not offer the protection of the state guarantee fund.
Here are several other items to consider when choosing your MPL insurance company:
- AM Best Financial Strength Rating – many hospitals and health insurance companies require you to maintain insurance with a company that has at least an “A” rating. www.ambest.com
- Does the company specialize in medical professional liability?
- Does the company have knowledge of the local jurisdiction?
- Does the company pay defense costs in addition to the limits of liability stated on the declarations page?
- Does the company have a consent-to-settle clause? How restrictive is it?
- Is the company structure a stock company (owned by shareholders who share in its earnings) or a mutual company (owned by its policyholders)?
- What is the company’s rate history? Is it a stable history or have there been large rate increases?