It is extremely important for clinics to thoroughly research their medical malpractice and professional liability coverage options. As you consider your options, you should take note of different types of coverages, their limits, what is included in those limits (as opposed to what is considered “in addition to” the limits), and, of course, price.
It’s also important to be aware of longstanding myths regarding medical malpractice and professional liability, as these misconceptions may lead you to make less-than-ideal coverage decisions. To that end, here are five major myths to be aware of:
Myth #1: Cheaper is always better.
When you’re starting a practice, you hope you’ll never have to put your medical malpractice or liability insurance policy to use, so your gut—and your advisors—may encourage you to purchase the cheapest insurance option available. Don’t fall into this trap!
While claims-made policies seem cheaper at the onset, they require that you also purchase a tail policy—and that cost isn’t always disclosed upfront. You’ll typically end up paying 200% more for tail coverage when your policy terminates—versus a minimal short-rate cancellation penalty of about 10% (or, in some cases, no cost at all) when you non-renew. If you cancel your claims-made policy for any reason, you are left unprotected for any claims brought on after the expiration date—even if those claims involve events that occurred while you were covered—unless you purchase the tail coverage.
Occurrence coverage, on the other hand, will protect your business for any claims concerning incidents that happened while you were covered—even if that coverage is no longer in effect.
Beyond that, the biggest detail to research is the stability and long-standing history of any liability insurance provider you’re considering. The reality is that many insurers are also dealing with the implications of these uncertain times, so you want to make sure you’re putting your money and your clinic with a company that will be there for you when you need it most. AM Best is a good starting point for researching the financial strength of an insurance company.
Myth #2: Your policy looks out for your interest.
Many PT clinic owners believe that all insurance products are designed with the provider’s best interests in mind. This is not the case. Thus, knowing the difference between various consent to settle options (e.g., a hammer clause, at company discretion, and pure consent) is essential to the protection of your clinic.
The only option that puts you in the driver’s seat of your clinic’s reputation is having pure consent. Pure consent means you decide whether or not you want to settle, and the insurance company will still pay out the full amount up to your limits should you lose at trial.
With a hammer clause, you have the option to avoid a settlement, but the insurance company will only pay up to the settlement amount should you lose at trial. The rest of the loss could be on you personally.
The “at company discretion” option potentially minimizes the level of input you get in a settlement, which is not something any prudent provider wants when their name, specifically, is on the line.
Myth #3: Defense is covered.
Your current policy may check the box of having your defense covered, but it’s important to review the coverage details carefully, because many insurance companies include the defense costs within your policy limits. To get the most out of your policy, make sure it provides defense costs in addition to your policy limits.
Myth #4: Cyber-attacks are not a risk.
What are the odds of a cyber-attack? According to the Ponemon Institute's 2017 Cost Of Data Breach Study, the probability of being struck by lightning is 1 in 960,000 could be struck by lightning, and the probability of getting into a car accident is 1 in 336. But, 1 in 4 will experience a data breach.
You might assume that your PT clinic—along with other small to medium-sized enterprises (SMEs)—isn’t at risk for cyber-attack. On the contrary, the landscape for attackers is huge, and it is imperative that companies of all sizes have some kind of protection in place to avoid becoming the target of an attack.
An individual’s health record is worth 10 to 20 times more on the black market than a credit card number. Health records contain vital information—like a patient’s name, date of birth, diagnoses, and billing information—that lays the foundation for identity theft.
Here are a few more cyber-attack fast facts (according to the above-cited study):
- 79% of breaches affect entities with less than $1 billion in revenue. (Source: Baker Hostetler)
- $1.56 million is the average post-breach response cost in the US. (Source: IBM)
- 43% of SMEs identified cyber breaches or attacks within the last 12 months. (Source: 2017 Cyber Security Breaches)
- 60% of small businesses go out of business within six months of a cyber-attack. (Source: US National Security Alliance)
Myth #5: You’re already covered for cyber incidents.
Cyber liability insurance is typically not included in a clinic’s professional or general liability insurance policies. Obtaining cyber liability insurance coverage is the quickest and easiest way to protect your clinic (and its reputation) from the consequences of online data theft.
Perhaps the biggest thing to keep in mind when shopping for medical malpractice and professional liability insurance is that a good price does not necessarily equal good quality, so don’t let price be your starting point. Unfortunately, many insurance companies and startups will jump into markets that seem advantageous and offer really low premiums compared to the competition. This allows them to get a good handle on market share as quickly as possible. The problem is that medical malpractice claims often do not come up for a few years, but then, too many insurance claims are made on underpriced policies. This typically means:
- insurance rates increase dramatically; or
- the insurance company exits the market, leaving their insureds high and dry and at major risk.
Economic downturns often lead to hard markets in the insurance industry. As the coronavirus pandemic continues to bring the world toward this reality, be sure to carefully evaluate the malpractice experience and commitment of any insurance provider, as any insurance companies’ solvency is most definitely in question.
William G. F. Sullivan, Esq., LL.M. in Health Law, is the Executive Vice President of CM&F Group, Inc. and a healthcare attorney by trade (licensed in Florida). Currently, he manages the Service and Underwriting operation of CM&F Group, as well as its Strategic Initiatives and Partnerships. Prior to joining CM&F Group, he consulted CMS on the implementation of the Affordable Care Act. His undergraduate degree is from University of Notre Dame; he garnered his law degree from Ave Maria School of Law in Naples, Florida, and completed his Master’s of Law through Loyola University of Chicago’s Healthcare Law Program.