Malpractice 101

No one likes to think about being sued. But it is the reality in today’s health care marketplace. While physiatrists, in general, have a much lower risk of being sued in comparison to other specialties (i.e. neurosurgeons, gynecologists, orthopedists), it can still occur. Obviously, prevention is the best frontline offense – by thorough documentation, prompt evaluation, treatment, and referral, systems in place to handle patient test results and follow-up… the list goes on.

But you also need to understand the defensive plan. This will center on your malpractice insurance. After hearing practicing physicians talk about malpractice coverage, I realized that there was an entirely unique language used to describe the details of the coverage and, as you can expect, many different variables to consider when looking at different policies. Here is a run down of the “nuts and bolts” that you need to understand before you sign on the bottom line.

Occurrence and Claims-Made Coverage

Occurrence policies cover claims on the basis of when they happened, regardless of when they are reported. A claims-made policy covers claims on the basis of when they are reported. Claims-made policies are the most common type of professional liability coverage, because premiums are typically less costly.

There is a third type of coverage called a claims paid policy. Under this policy, premiums are based only on claims that were settled during the previous year or expected to be settled in the coming year. These policies may be assessable for years, even after the policy has terminated. Physicians who have this type of carrier may have difficulty obtaining “nose coverage” from a new carrier and may have to purchase “tail coverage” from the prior insurer.

What is Nose Coverage?

This will cover claims first made against the physician after the effective date of coverage. In other words, it would cover events that occurred in the past as long as the date of the claim occurred after the new policy’s effective date.

What is Tail Coverage?

This is typically purchased at the time of a claims-made policy and offers coverage for incidents that occurred while the policy was still active, but were not actually reported until after the policy’s termination.

How Do I Choose Policy Limits?

There is no clear-cut answer. Some practices and hospitals will require or recommend coverage limits. Selecting the limits that are appropriate for your practice will be a personal decision. However, as you may have already experienced, if you’ve researched life insurance, often substantially greater limits can be obtained without large jumps in premiums. Policies are typically provided with two different limits: the maximum amount paid out per claim, and the maximum amount paid out per calendar year. An example would be a $2 million / $4 million policy. This would provide a payment of $2 million maximum per individual claim and a total of $4 million for all claim payments during that calendar year.

Finally, a brief word on premiums. In your first year of practice, your likelihood of being sued is much lower than it will be in five years, as you don’t have the patient base or the history behind you – it is somewhat of a numbers game – so your premium will be lower. Malpractice companies will typically increase your rate in a step-wise fashion over 5-6 years and then level off, with increases then being due primarily to industry demands (the state of malpractice reform – a topic for another article!).

Just as with any insurance policy, there are significant differences in coverage. Ideally, you will want to find a company that specializes in physiatry, as they will typically offer the lowest rates for the best coverage. It is also important to review their track record.

A new company’s rate often will significantly undercut the competition. At the time of your next renewal, the company often will increase your rates or leave your state, making it difficult for you to transfer to another company should you experience a major lawsuit.

Pay attention to their “defense” strategy – will they likely attempt to settle or will they defend you if a claim is without merit? While it may be cheaper in some instances to settle a claim, it still goes on your record as a claim. Find out if the cost of defending your case comes out of the payment maximum or if it is provided to you as a service of that company. Look closely at the coverage – some policies will cover ancillary personnel, defense for Medicare/Medicaid fraud, sexual misconduct, etc.

As with anything, it pays to be a savvy consumer. Not taking the time to fully understand your policy can be very costly when you are looking at your first lawsuit.

Linda Ladesich, MD, MS
University of Kansas Medical Center
LLadesich@kumc.edu