Avoid Unpleasant Surprises with Malpractice Coverage
Emergency physicians (EPs) might be very surprised to learn that if they are sued, the malpractice case could end up being settled without their consent — even if the claim is very defensible — depending on the terms of their malpractice coverage.
This can have serious negative repercussions for the EP. "Obviously, if there is a settlement, that means a National Practitioner Data Bank [NPDB] report, and in some states, a medical board report," says Robert J. Milligan, JD, an attorney at Milligan Lawless in Phoenix, AZ.
In some instances, the interests of the insurer can be adverse to those of the EP, says William Sullivan, DO, JD, FACEP, an emergency physician at University of Illinois in Chicago and a practicing attorney in Frankfort, IL.
"Physicians are generally unwilling to settle weak malpractice cases against them, since settlement would result in a report to the [NPDB], and may result in higher insurance rates or difficulty finding future employment," he explains.
Insurers, on the other hand, may wish to settle a weak claim in order to avoid additional expenses of litigation. "If the policy does not require a physician’s consent to settle a claim, then the insurer has the ability to settle a nuisance claim against a physician regardless of the claim’s merit," notes Sullivan.
Typical policy language permitting such actions will state that the insurer may settle a claim against an insured as it "deems expedient." "Better policy language would state that the insurer may not settle any claim against the insured without the insured’s advance written consent,’" says Sullivan.
Here are two other questions EPs should get answers to regarding their malpractice coverage:
• Is the policy claims-made or occurrence-based?
Most policies purchased by individual EPs or ED groups are "claims-made," says Milligan. This means that if a claim is made during the policy period and it arises from events that occurred during a policy period, the EP is covered.
"But if the claim arises after the policy period is over, you are out of luck and are not covered," Milligan.
"Claims-made" policies usually have a reporting requirement as well. "So a claim has to be made during the policy period for events that occurred during the policy period and also reported during the policy period in order to bind coverage," says Sullivan.
For this reason, most EPs maintain coverage until they retire or leave the state, says Milligan. However, if EPs become employed and insured by a hospital, the coverage stops when the physician leaves the hospital’s employment.
"So EPs have to make sure that the hospital will provide coverage for claims against them involving services that were provided as an employee, even if the claim arises after the EP leaves and the hospital policy is terminated," says Milligan. Most hospital employment agreements Milligan has seen provide occurrence coverage, which means the EP is covered regardless of when the claim is made.
"If it doesn’t, it can be a fairly expensive trap for the emergency physician when he or she leaves hospital employment," says Milligan. "The EP has to buy tail’ or nose’ insurance, which are separate policies and can be expensive."
• What doesn’t the policy cover?
Depending on their specific terms and conditions, malpractice policies may not cover all the types of claims an EP is at risk for, says Mike Merlo, JD, managing director of casualty legal and claims at Aon Risk Solutions in Chicago.
"Most professional liability medical malpractice policies provide coverage predominantly for just that — liability arising out of a medical professional service," says Merlo.
The exclusionary language in malpractice policies is important, underscores Sullivan. "While malpractice insurance may cover the physician for mistakes in medical diagnosis and treatment, there are many other acts that malpractice insurance will not cover," says Sullivan.
Intentional acts such as assaulting a patient, grossly negligent acts, fraudulent acts such as changing chart entries without labeling the changes in an attempt to cover up a mistake, and acts that occur while under the influence of drugs or alcohol are excluded from most malpractice coverage. An EP’s coverage typically won’t cover claims alleging harassment or discrimination.
"An EP might encounter greater risks of claims with those allegations, moreso than a specialized or general physician who has long-term relationships with their patients," says Merlo.
Malpractice policies generally do not cover contractual liability. "This is an important point," says Sullivan. If a physician signs a contract agreeing to supervise mid-level providers or residents, the malpractice policy may not provide coverage if the physician is sued because of the actions of these entities.
"This exclusionary language is even more troublesome when considering that most state licensing acts not only require that mid-level providers work under a supervising physician, but the statutes also require that physicians accept full responsibility for the actions of the mid-level providers," says Sullivan.
Indemnification clauses are another example of a contractual liability that may not be covered under malpractice insurance policies. An EP who agrees to indemnify or "hold harmless" the group or hospital from liability, says Sullivan, may give an insurer the ability to deny coverage in the event of a claim.
"Administrative activities will likely be excluded from malpractice coverage, so liability for actions taken on credentialing committees or medical executive committees may not be covered," says Sullivan. This exclusion may be especially pertinent when committees either refuse to credential a physician or revoke the credentials of a physician, since such actions are more likely to result in litigation.
"Similarly, disciplinary or administrative proceedings against a physician, such as state licensing board investigations, will likely be excluded from malpractice insurance coverage," says Sullivan.
Hospital administrators may be willing to supplement the EP’s coverage, or the EP could purchase insurance for specific areas they aren’t covered for.
"EPs might consider telling their employer they have reviewed the policy and are unsure it covers them for areas they might have exposure to, and asking them to pay for a consultant to review the coverage," suggests Merlo.
Regardless, says Merlo, "the EP should make sure they understand what their insurance covers them for. There is no substitute for getting a copy of the policy and reading it."
Sources
For more information, contact:
- Mike Merlo, Esq., Managing Director, Aon Risk Solutions, Chicago, IL. Phone: (312) 381-5169. E-mail: [email protected].
- William Sullivan, DO, JD, Frankfort, IL 60423. Phone: (708) 323-1015. E-mail: [email protected].
