Malpractice Asset Protection Part 5: Understanding insurance

Asset Protection for physicians has three primary layers, compliance, insurance, and legal tools that separate assets and liabilities.

How Do Doctors Buy Medical Malpractice Insurance?

• Self-employed physicians typically purchase malpractice group or individual insurance through traditional third-party insurance companies or risk retention groups.
• Physicians employed by a group practice as non-partner “employees” are usually covered by the group as part of its operating expenses.
• Partners in group practices are often either covered by the group as one the benefits of their partnership or each physician pays for their own share of the coverage from their own production.
• Hospital-employed physicians are typically covered by the employing hospital.
• Physicians practicing as federal employees typically do not carry medical malpractice insurance as the federal government self-insures against liability claims.
• Some state and local governments may provide similar benefits, but physicians are advised to have specific written details on any existing coverage and what your additional suggested risk management should be.

What is A Risk Retention Group or “RRG”?

The National Association of Insurance Commissioners (NAIC) defines an RRG as follows: 

Risk Retention Groups (RRGs) are liability insurance companies owned by its members. RRGs allow businesses with similar insurance needs to pool their risks and form an insurance company that they operate under state regulated guidelines. RRGs are formed using a combination of state and federal laws under the auspices of the Federal Liability Risk Retention Act (LRRA).

All insureds of an RRG must be owners of the RRG, and all owners of the RRG must be insured. RRGs may be formed under a state's captive or traditional insurance laws. The RRG is domiciled in one state but may do business in any other state by completing a registration process and designating the state’s commissioner as agent for service of process.

What are the Two Major Types of Medical Malpractice Insurance?

There are two different kinds of malpractice insurance: Claims-made and Occurrence. One of the most concise descriptions of the differences between the two come from a summary provided by the AAAPR a physicians and provider recruiting organization:

Claims-Made insurance indemnifies you from malpractice “claims made” by patients only when that policy is active. If you leave a job that has claims-made insurance, you will have to purchase “Tail” coverage. The tail coverage will protect you in case a claim is made after the policy lapses for an incident that occurred when you were covered.

Occurrence-Based insurance provides coverage for any incident that occurs when the policy is active, regardless of when a claim is made. In other words, you do not need to purchase Tail coverage. Occurrence is generally considered the “better” insurance, as it provides more security and less hassle. It is, of course, more expensive.

The report also adds this important caveat about tail insurance for practicing physicians that are moving from one practice to another.

If you are already practicing and have claims-made coverage, one negotiating point would be the purchase of tail coverage, which can be tens of 1000s of dollars. It might be in your new partners’ best interest to provide tail coverage for you as you join their practice.

What Does Medical Malpractice Insurance Cover?

This an exceptionally fact-specific question; assume your policy covers only exactly what it says it does and not a single other issue or dollar. If you are found labile for acts resulting in bodily injury, medical expenses, property damage, or wrongful death, the Insurance Information Institute (III) identifies some basic expenses that the majority of policies cover to protect you from the costs of defending or settling a lawsuit including damages themselves

• Attorneys’ fees and court costs.
• Arbitration costs.
• Settlement costs.
• Punitive and compensatory damages.
• Medical damages.

What Does Medical Malpractice Usually Exclude?

Again, this is a policy-specific question, but there are some acts and occurrences that are generally excludedon an industry-wide basis.

• Reckless and intentional acts that rise above the level of mere medical negligence and illustrate wanton and willful disregard for patient safety
• Acts that are illegal or criminal in nature
• Malpresentation on a physician’s application for Insurance
• Sexual misconduct, consensual or not
• Hospital administration errors

All insurance is not the same, know the details of your specific coverage.

_{About the Author}

_{Ike Devji, JD, has practiced law exclusively in the areas of asset protection, risk management and wealth preservation for the last 16 years. He helps protect a national client base with more than $5 billion in personal assets, including several thousand physicians. He is a contributing author to multiple books for physicians and a frequent medical conference speaker and CME presenter. Learn more at www.ProAssetProtection.com.}