Good medicine

What do producers need to know before diving into the field of medical malpractice liability? Insurance Business America caught up with two experts to find out about the intricacies of the space and the importance of becoming a specialist

Good medicine

Opinion

By

In providing physicians and surgeons with protection in the case of malpractice, medical professional liability policies play an integral role in the US healthcare system. Medical professional liability typically insures a physician or surgeon against any bodily injury or damage that is caused to a patient during the rendering of, or failure to render, medical professional services. Unlike typical errors & omissions policies, which insure a financial loss component, medical malpractice liability is more focused on physical harm and long-term disability.

“One of the most common causes of legal action we see is failure to diagnose, whether that’s lung cancer, breast cancer or any type of harmful disease,” explains Jim Baldyga, VP and medical professional leader at General Star Management Co. “We also see many claims after complications in surgery, or if surgery does not have the impact a patient envisaged – for example, an orthopaedic patient who has surgery for back pain, but finds that the pain is not alleviated.”

Claims made against plastic surgeons by unsatisfied clients are also common. Obstetricians are vulnerable as well if a complication during the birthing process leads to the baby being affected by cerebral palsy or the mother suffering a physical injury or death. “All of these situations are covered by medical professional liability,” Baldyga says.

There are myriad risks for any physician or surgeon who does not have modern, comprehensive medical professional liability coverage in place. Having to face a lawsuit with inadequate coverage, or a policy with coverage gaps, could be catastrophic.

“The good thing about buying an insurance policy is that you’re also buying a defense – if somebody dies during surgery, you’ll be provided with a legal defense,” Baldyga says.

“If there is an indemnity loss, or if there needs to be a settlement or liability, that will also be covered. If the insurance company feels that there is no reason to settle, the suit may go to trial, and those expenses are covered, too.”

Baldyga notes that most doctors buy $1 million worth of medical professional liability, which also includes an unlimited legal defense clause. “We had a recent case in Chicago where we ended up paying $400,000 to defend a policyholder,” Baldyga says. “He eventually got let out of the case, so we paid no indemnity, but it did result in $400,000 in legal expenses. That’s unusual, but it does happen.”

Specialist knowledge
The language in a medical malpractice policy is fairly standard, and the coverage is generally broad. While there are exclusions, policies have tended to be standardized over time. However, that doesn’t take away from the complexity of the medical malpractice space. “It’s a specialist space that, for many brokers, is their only professional focus,” Baldyga says. “To be successful in this space, brokers need to know all of the ins and outs of the business.”

Medical malpractice laws and insurance vary by jurisdiction, so brokers working in this arena must have a strong knowledge of each state’s requirements if they want to service clients across the country.

An important aspect of this information gathering is to find out the medical malpractice limits physicians typically carry in each state, which states have a cap on damages and what impact that may have.

“In the state of Indiana, for example, if a physician were to enroll in the Indiana Patient Compensation Fund, the physician’s damages are capped in the event of a malpractice claim,” explains Matt Anderson, senior vice president of medical professional liability at RT Specialty. “Even if a jury awards a family $6 million in a medical malpractice case, the judge would have to cap the amount of damages to an amount that would be substantially less. Having that sort of knowledge is one way that brokers can differentiate themselves, especially when dealing with multi-state exposure.”

Innovations in technology, and specifically telemedicine and telehealth, are also forcing brokers to increase their knowledge of countrywide legislation. “Telehealth enables a physician in Florida to have a conference with a patient in Illinois over the internet,” Anderson says. “The physician is able to diagnose x-rays and imaging scans and then provide the patient with guidance.

The concept has forced brokers to familiarize themselves with each state’s medical insurance requirements and guidelines in order to provide coverage.”

Prior to working in the medical malpractice side of the business, Anderson operated as a retail agent focusing on lawyers’ professional liability. But when he decided to become a wholesaler, he wanted to focus on medical malpractice.

“Concentrating on one area gives a wholesale broker the ability to differentiate himself or herself and succeed,” Anderson says. “It allows you to become great at one thing and keep your fi nger on the pulse of the industry. It enables you to get a sense of where the market is going in terms of coverage and price. A generalist broker may be good at a lot of things, but a broker focused on a particular area can choose to be great at one.”

Standing out from the competition
For brokers who do want to focus on the medical malpractice space, the policy form is of utmost importance. Carriers are now throwing sub-limited coverage onto policies for HIPAA violations, Medicare and Medicaid audits, medical billings and E&O, and brokers are expected to keep on top of a carrier’s updates.

“A broker who knows how the regulatory climate pertains to malpractice is at an advantage because the landscape is changing, especially now that we have electronic medical records and an uptick in medical audits,” Anderson says. “Having a strong understanding of regulatory features and their impacts is very important because there are so many markets today writing this coverage. I work with over 30 carriers who will write medical malpractice coverage in some capacity. Being able to keep up with 30 insurance companies’ underwriting appetites and policy forms would be difficult for any broker simply dabbling in this area.”

The biggest challenge for brokers working in today’s medical professional liability industry is competition. There are many markets willing to write physician medical malpractice, whether in the surplus lines non-admitted arena or the admitted standard market, but due to increased consolidation in healthcare, there are fewer insureds buying coverage. “There seem to be more brokers than there are insureds wanting to buy the coverage,” Anderson says. “Competition has also driven down premiums, so brokers are working as hard, if not harder, for less commission.”

In response to the saturated nature of the market, Anderson advises brokers to focus on practice specialties that are insulated from mergers and acquisitions of hospitals, health systems and other physician groups.

“I have worked in the locum tenens physician contract staffing world and had lots of success,” he says. “With hospitals being short-staffed of doctors, healthcare organizations are relying on third-party providers to staff the hospital. Insuring those staff locum tenens accounts has been successful because they’re not going to be purchased by a hospital or large healthcare system.

Healthcare for those who are incarcerated is an area that I’ve also had a great deal of success with because it’s also insulated – hospitals are not going to be getting into that space and insuring the business.”
 

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