Evaluating an insurance policy

Liability insurance companies generally offer a wide variety of insurance products, or policies, from which to choose. Physicians and any staff who assist with the purchase of liability insurance should familiarize themselves with a few of the basics of insurance and select a policy accordingly. The following checklist contains basic questions to ask when evaluating a professional liability insurance policy.

Type of coverage

1. Should I choose an occurrence or a claims-made policy?
2. If I elect an occurrence policy, will I be able to buy it in my state?
3. If I elect a claims-made policy, is the policy I am considering a standard claims-made, modified, or reporting forms claims-made?
4. Do I fully understand the differences among these types of claims-made policies?
5. If I choose a claims-made policy, do I understand the advantages as well as the disadvantages?

Limits

1. How do I determine how much coverage to buy?
2. What amounts of coverage do other physicians in similar practices in my area buy?
3. What portion of my personal assets do I want to risk in the event of a large claim?

Premiums

1. What is the premium for the policy?
2. Is it payable quarterly, semiannually, or annually?
3. Do any discounts apply for taking risk-management courses or for having no claims?
4. Are other discounts available?
5. Will the insurer surcharge me if I have more claims or larger claims payouts than other physicians in my specialty?

Deductibles

1. Does the company offer deductibles?
2. Should I accept a higher deductible on awards and/or defense costs in return for premium discounts?
3. Can I handle the economic consequences if I have to absorb the deductible?

Definition of a claim

1. If I choose a claims-made policy, how does it define a claim triggering coverage?
2. Does coverage begin when I report an adverse incident?
3. Does coverage begin only when an actual claim for money or services is received?
4. Does a letter or telephone call from a disgruntled patient or his lawyer constitute a claim?
5. Does a lawyer's request for a patient's records constitute a claim?
6. Does a notice of intent to sue or notice of an actual legal action trigger coverage?

Claims reporting

1. If the policy stipulates that I must report all incidents and claims in a timely fashion, what is the time limit for reporting?
2. Which incidents and claims must be reported?
3. Can I lose my coverage if I fail to report in the specified time frame?
4. Do I have to notify the insurer in writing of an adverse incident, or is a telephone call sufficient?
5. To whom must I write or speak?
6. What documentation must be included with notification of a claim or incident?
7. If I report incidents that may not become claims, will I be surcharged?

Tail coverage

1. What are the tail-coverage provisions in a claims-made policy?
2. Is there a provision for free tail coverage if I retire, become disabled, or die?
3. Does this free tail coverage require me to stay with a given company for a certain number of years? If so,how long?
4. How does the policy define disability, and who makes the disability determination?
5. How old do I have to be to retire and receive free tail coverage?
6. If I do not qualify for free tail coverage, does the company guarantee that I can buy this coverage if I want to change carriers or the company decides to drop me?
7. What is the time limit for buying the tail?
8. How much would tail coverage cost me?
9. Will I be able to pay for it in installments?
10. If I pay it in installments, is the original price guaranteed or could the price rise over time?

Cancellation

1. Can I terminate my policy at any time?
2. How much notice must I give to cancel?
3. Can the company cancel my coverage or refuse to renew my policy?
4. For what reasons can a company decide to cancel me or not renew me?
5. How much notice does a company need to give me if it cancels or will not renew me?
6. Am I entitled to a refund of premium if I am canceled or not renewed?

Extent of coverage

1. How broad is the coverage provided?
2. Does it cover only patient injury claims, or does it extend to other professional activities, such as peer review, credentialing, and utilization review?
3. Does it cover actions brought against me by a state licensure board or a hospital?
4. Does the policy cover acts and omissions by my office staff members?
5. Is there an additional premium for covering my staff?
6. Does coverage extend to injuries arising from events such as slips and falls occurring on the office premises?
7. Does the policy provide coverage for a locum tenens physician who might temporarily take over my practice while I attend a meeting, take a vacation, or become ill?
8. Is there an additional premium for this locum tenens coverage?
9. Does the policy cover me if I use telemedicine in diagnosing or treating a patient in another state?
10. Am I restricted to practicing in a certain geographic area?
11. Can coverage be arranged if I want to practice across state lines?
12. If I help someone in an emergency situation in another state, will I be covered?

Policy exclusions

1. What does the policy not cover?
2. Will any of these exclusions narrow the scope of my practice?
3. If so, can I negotiate coverage for certain exclusions in return for a higher premium?

Practice variations

1. If I change my practice, eliminating certain procedures that carry a higher risk, will I qualify for a lower premium?
2. If I eventually want to practice part-time, will my policy cover me?
3. If I become ill or want to stop practicing temporarily for other reasons, can I suspend my policy without terminating it?

Defense costs

1. Does the policy cover all defense costs, including attorney's fees, court costs, expert witness fees, and expenses and miscellaneous costs for depositions?
2. Are there limits on the amount of defense costs the insurer will pay?
3. If so, are defense costs subtracted from the indemnity liability limits?
4. If I agree to pay my own defense costs, will I be able to review all these costs personally?
5. When the company pays defense costs, can I choose my own defense attorney?
6. How are defense attorneys selected?
7. Can I change attorneys if I am not satisfied with my legal representation?
8. If I buy a policy that says it will provide only a joint defense for me and my hospital (or group or managed-care plan), am I entitled to my own attorney if we have an irreconcilable disagreement about defending the claim?
9. Will I be reimbursed for time away from practice if I have to help in defending a claim?
10. What fee arrangement does the company have with its attorneys?
11. Is it a flat-fee arrangement?
12. If so, how can I be sure that my interests in obtaining a good defense will take precedence over the company's desire to hold down defense costs?

Consent to settle

1. Who decides whether and when to settle a case?
2. Do I have the right to refuse to settle a claim that I think should be defended?
3. If the company wants to settle and I do not, how are such disputes resolved?

Additional coverages

1. Should I look for an insurance package that includes coverage for office premises liability, employee liability, property damage, or auto insurance?
2. Do I need stop-loss insurance to cover any financial losses resulting from my managed-care activities?

This checklist is excerpted and adapted from the AMA publication,
Medical Professional Liability Insurance (PDF, 501KB), which goes into more detail as to what some of these concepts mean and why it is important to ask these questions.