PF&M at a Glance
Physicians, surgeons and dentists professional liability insurance
Physicians, surgeons and dentists professional liability insurance has proved to be a difficult line for the standard insurance market for a number of years. Although the Insurance Services Office (ISO) provides coverage forms and endorsements for this line, most of the insurance is written in risk retention groups, captives or other alternative markets that use proprietary forms which may or may not start with ISO wording. This lack of standardization can make it difficult to compare coverage forms or determine value for the client based on pricing provided by different markets.
One method of providing a comparison is to start with a standard, such as ISO, and then compare the various options to that standard. This allows the reviewer to be more analytical and critical and should reveal important coverage gaps that can be discussed with a client prior to any change.
Throughout this column, we will be reviewing the ISO PR 00 02-Physicians, Surgeons and Dentists Professional Liability Coverage Form. Although ISO has both an occurrence and claims-made version of this coverage form, we are discussing only the claims-made version because most professional coverage is written using claims-made forms.
The ISO form consists of two versions. Under the first, Coverage A—Individual Professional Coverage, the only person who is covered is the individual listed on the policy as the named insured. Coverage B covers various types of business entities. These include a partnership, as well as all partners acting on behalf of the partnership; a limited liability company, as well as its members and managers; an association or organization, as well as its executive director, trustees, governors and stockholders in their respective roles. A limited liability company is covered as an insured as are all members and managers of the limited liability company. An association or organization is an insured as well as the executive director, trustees, governors and stockholders.
Under Coverage B, any who are not actually listed as named insureds are covered only for acts that arise from professional actions of others and for which they would be held liable. This means that a partner, manager or director is not covered for his or her own individual professional actions under Coverage B and would therefore need to carry an Individual Coverage A type policy.
Under Coverage A, the Insuring Agreement for Individual Professional Liability, the insurance company agrees to pay those sums that the insured becomes legally obligated to pay as damages. The damages must be due to an injury. The injury must be caused by a medical incident and the medical incident (but not necessarily the injury) must take place in the policy’s coverage territory. The medical incident must occur after the retroactive date in the Declarations, and the claim must be made no later than 30 days after the end of the policy period. Last, the injury must arise from the insured’s profession as physician, surgeon or dentist.
Coverage B, the Insuring Agreement for Partnership, Limited Liability Company, Association or Corporation Professional Liability, substitutes the term “business entity incident” for “medical incident,” and the injury must be caused by a person for whom the business entity is legally responsible.
A very important part of both of the coverages is the insurance company’s right and duty to defend. The insurance company must defend any claim for which this insurance could apply. Under Supplementary Payments, it is explained that the expenses incurred with the investigation and defense of any claim are outside the limits of insurance provided by the policy. This is a major issue because the cost of defense can often be more than the actual loss payment. If the cost of defense is within the policy limits, the insured’s limits can be depleted prior to any payment.
Medical incident includes acts or omissions that the insured performs but, also, the acts of any person who is being directed or supervised by the insured. The actions must be that of providing or failing to provide medical or dental professional service. Under the Coverage A-Individual Coverage—medical incident also includes acts or omissions that arise from the insured serving on an accreditation, review or standards board.
Business entity incident also expands coverage by including acts or omissions by the partners, members, managers, directors, stockholders, governors or directors of the business entity named as an insured but also the named insured’s employees and any person acting under the direction of a partner, member, manager, director, stockholder, governor or director. Again, the action must be that of providing or failure to provide medical or dental professional service.
As with all policies, the exclusion, limit of insurance and condition sections must be carefully compared to see what subtle differences may result in coverage or denial of coverage.
Because this is a claims-made policy, there is also an extended reporting period section. This could also be called the tail coverage section. As noted earlier, only claims that are presented within 30 days following the policy expiration date are covered. If coverage is needed for claims that are presented more than 30 days after the policy expiration date, a supplementary extended reporting period or “tail coverage” must be purchased.
It is important to know how long the basic tail is, how long a tail may be purchased, when the tail must be requested and whether or not an additional aggregate limit is available when the tail is purchased. ISO provides for the supplementary extended reporting period. One item that may be of particular importance to some clients is the unlimited tail that is provided when the insured retires, becomes disabled or dies.
Please note that this is only an overview of this coverage. A thorough discussion of this coverage form may be found in the PF&M Analysis from The Rough Notes Company.
Agency OnLine subscribers, please refer to PF&M Section 381.1, Physicians and Surgeons Professional Liability Insurance for more in-depth discussion of this coverage part.