By Gregory Freeman
Professional liability insurance is a necessity in the healthcare field, but it often is not fully understood by those who need it the most, says Jennifer Flynn, CPHRM, risk manager with Nurses Service Organization in Fort Washington, PA. This type of insurance is purchased to cover clinicians for the cost of being sued for malpractice. A lot of things go into the decision making of whether or not to purchase insurance and exactly what type is needed, she says.
“If you’re following your state practice act and working within the scope and standards of your license, this coverage is going to respond to treatment or advice or services that resulted in an injury. It’s going to pay for up to the applicable limits, legal fees, and settlements and costs associated with the lawsuit stemming from that professional matter,” Flynn says.
A first decision is whether to obtain an occurrence policy or a claims made policy. There are differences in both coverage and the way that they work, Flynn explains.
Professional liability insurance policies can be written on a claims made or occurrence basis. Claims made policies covers claims filed during the policy period, but an occurrence policy covers claims that occur during the policy period, regardless of when the claim is filed, she says.
“If you purchase an occurrence policy on Jan. 1, 2024, and you had continuous coverage through Dec. 31, 2025, if a medical malpractice claim occurs anytime during when the policy is active, you are covered. With an occurrence policy if the patient is injured on July 10, 2024, but the claim isn’t reported until May 15, 2025, that occurrence policy was still in force, and will still provide coverage,” Flynn explains. “If we take the claims made policy, which again offers coverage for claims that occur and are reported when the policy is in force, once the policy expires, coverage expires, unless you buy a tail for that or an extended reporting period.”
With that same example, if a clinician purchases a claims made policy on Jan. 1, 2024, and stops coverage on Dec, 31, 2025, if a medical malpractice claim occurs and is reported any time during those years when the policy is active, the coverage will respond, she says.
“If that incident occurred on July 10, 2024, but was not reported until May 15, 2026, since the claims made policy has now expired, there wouldn’t be any coverage again if you had not purchased that tail, which would extend that reporting period,” Flynn says.
Another issue to look for in a liability policy is the limits of liability. Typically, there are two types of limits — a per claim or per occurrence — and then an aggregate limit, she says. The per claim is any amount that the insurer will pay in a single claim or incident, and the aggregate limit is the maximum amount that the insurer will pay for all covered claims during that policy period, which usually is a year, Flynn says.
“When we talk about $1 million per claim, $3 million aggregate, you would have to have three $1 million claims in that annual policy period for that coverage to be exhausted. But I think, for most people, a lot of times, they’re going to look at their policies by their employment status,” Flynn explains. “For employed professionals who are typically covered by their employer, this type of insurance becomes supplemental to that but may provide additional coverage extensions to what their employers provide.”
One of those extensions of note is defense for complaints made at the state board level. Employers who are mandated reporters or who launch their own investigations against unsafe or unethical practice might then have a duty to report you to your state board, and the employer is not going to provide coverage for that, Flynn says.
“An employed professional might take out their own insurance policy, not just to have those additional coverage extensions, like the license defense, but they want to be covered for anything they’re doing outside of their employment as well — volunteering, if they’re doing any clinical work at a charity auction, or a charity outing, or a health fair,” she says. “Self-employed professionals, or even independent contractors who aren’t covered by an employer, will want to seek to get coverage that is primary to what they’re doing to cover them for any errors or negligence in their services.”
Clinicians sometimes assume that they will be covered by whatever insurance their employer has, which can be true up to a point, Flynn says. But it can be wise for a clinician to obtain their own coverage.
“A lot of times, we hear employers who might discourage their employees from getting their own policy. We sometimes hear a misperception that having your own professional liability insurance policy makes them a target for a lawsuit. But this is not the case,” Flynn says. “It is a personal decision on whether or not to purchase that, so your insurance is confidential to you. It’s not made public. And at any time that you have liability insurance, you know the allegations that are going to come in are going to be focused on the incident that happened. The allegations are going to be against your clinical decision-making rationale. And by the time that you’re named in that lawsuit, and you might be having to give under-oath testimony, you’ll want to make sure that your own attorney is sitting at the table, giving you advice for navigating through that claim.”
The last thing to consider is the company itself. Look for the financial stability of the insurance company, Flynn advises. Many financial strength ratings are listed on public agencies, such as AM Best and Moody’s, and these ratings indicate the company’s ability to pay claims now and in the future, she explains.
“The question that we get most often is, ‘What happens if there’s something new for your profession, if legislation changes, if there’s a new modality that allows you or an expansion of your scope of practice that allows you to do things that are different from what you had done in the past?’” Flynn says. “You just want to make sure that, before you embark on providing any treatment or services, that you understand you know what is allowed or not allowed to do under your scope and scope of practice and license in your state. You can find that through your state board website. But, second to that, you’ll want to also check with your insurance company to make sure that they’re going to cover you for these new and different changes that might come down the pike. Healthcare is ever-changing and ever-evolving.”
Greg Freeman has worked with Clinican.com and its predecessor companies since 1989, moving from assistant staff writer to executive editor before becoming a freelance writer. He has been the editor of Healthcare Risk Management since 1992 and provides research and content for other Clinician.com products. In addition to his work with Clinician.com, Greg provides other freelance writing services and is the author of seven narrative nonfiction books on wartime experiences and other historical events.
Source
- Jennifer Flynn, CPHRM, Risk Manager, Nurses Service Organization, Fort Washington, PA. Telephone: (215) 773-4513. Email: [email protected].
Professional liability insurance is a necessity in the healthcare field, but it often is not fully understood by those who need it the most.
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