AVOIDING VICARIOUS LIABILITY LANDMINES
Don’t learn these lessons the hard way
By Krista Mayes
Some coverage forms actually stipulate that providers also need to carry their own primary professional liability limits in order for the facility’s coverage to kick in.
Though it applies across a range of industries, vicarious liability is particularly important for behavioral healthcare and addiction treatment facilities, a challenging sector that our team has been serving exclusively for more than 15 years. With these organizations, claims can arise from bodily injury, improper supervision, wrongful death and much more.
As the industry continues to expand rapidly, the potential for vicarious liability claims is only growing.
While agents work diligently to stay on top of these risks, there are a handful of vicarious liability landmines specific to the behavioral health space that we see frequently. Familiarizing yourself with these pitfalls can help you expertly manage nuanced risks, maneuver policy terms and ensure your clients are adequately protected.
Landmine #1: Putting too much stock in medical malpractice coverage. Medical malpractice insurance is a valuable risk management tool for healthcare professionals. It protects providers like physicians should their care or advice unintentionally harm a patient, but it is highly unlikely that the coverage will extend to the facility where they practice. Don’t forget that the facility is ultimately responsible for the treatment delivered by its providers and is usually the first one to be brought into a suit should a claim arise.
Landmine #2: Thinking healthcare providers don’t need to carry their own primary professional liability limits. Many agents assume that if the insured facility’s professional liability form includes vicarious liability coverage, then all healthcare providers working on their behalf are covered. With many carriers, that’s not the case. Some coverage forms actually stipulate that providers also need to carry their own primary professional liability limits in order for the facility’s coverage to kick in.
Consider this example: Dr. Smith is an employed physician for ABC Rehab, a medically assisted treatment provider for individuals dealing with opiate addiction. A client was mistakenly prescribed double the dosage of buprenorphine by Dr. Smith, which resulted in the client’s death. The surviving family filed suit against ABC Rehab and Dr. Smith for wrongful death. Dr. Smith carried their own medical malpractice insurance, which extended to their services rendered on behalf of ABC Rehab with a limit of $100,000. ABC Rehab’s policy form included vicarious liability coverage for the facility; however, the form stipulated physicians working on their behalf had to carry a minimum malpractice limit of $1 million for the vicarious liability coverage to trigger.
While Dr. Smith’s personal malpractice coverage defended them in this case, ABC Rehab was left without any coverage because they did not verify Dr. Smith’s policy carried the appropriate limits. Had ABC Rehab placed their professional liability coverage with a program like ours, defense would have been triggered through the vicarious liability provisions within the coverage form.
Landmine #3: Assuming employed and contracted treatment professionals have the same protections under a facility’s professional liability policy. We are among the few markets in the country offering comprehensive vicarious liability coverage and primary coverage for both employed and contracted professionals working for our insured behavioral health organizations. Other markets don’t extend the same coverage to contractors as they do to employees. That’s not something you want to find out the hard way.
Using ABC Rehab from our prior example, think about a provider like Dr. Jones, a contracted psychiatrist working part-time assessing clients. Upon intake, Dr. Jones met with a client and determined they were a candidate for 15-minute checks due to their mental state. However, Dr. Jones mistakenly left that detail out of the intake report that was provided to the staff. The client was placed on hourly checks based on standard protocol. Unfortunately, the client committed suicide shortly thereafter. The surviving family sued ABC Rehab and Dr. Jones alleging that had their loved one been checked on more frequently, this could have potentially been avoided. Though Dr. Jones carried their own malpractice insurance with a $1 million limit and otherwise met ABC Rehab’s professional liability policy’s requirement, the policy did not respond to claims stemming from the services provided by a contractor.
Landmine #4: Focusing only on physician risks. Physicians are typically at the center of vicarious liability discussions, but they’re not the only ones to be concerned with. Vicarious liability risks extend to a host of other treating professionals, such as psychiatrists, physician assistants, nurse practitioners, registered nurses and others. Yet, some coverage forms either specifically exclude these professionals or don’t include them in the definition of “who is an insured,” leaving the door open for potentially costly coverage gaps.
Landmine #5: Accepting a claims-made policy at face value. The hardening of the umbrella market is pushing even more carriers away from offering occurrence-based policies. While it might seem like a claims-made policy is your only option, that’s not really the case. There are select carriers that still offer flexibility in their reporting forms and give you the option to write a policy on an occurrence or claims-made basis. This flexibility goes a long way as you tailor coverage to meet your clients’ needs — and takes away from the pressure that you need to just take what you can get.
Knowing what to look out for is one of the best ways to protect your clients. If these cautionary flags raise any doubt, review your clients’ insurance policy wording to verify exactly who is covered and who is not. It’s equally important to revisit your clients’ contracts with their treating professionals to make sure insurance requirements are structured appropriately — and remember there are experts that can help you navigate the ins-and-outs of vicarious liability with confidence.
Krista Mayes is the Program Director of ATP, the leader in behavioral healthcare insurance. Built by NSM Insurance Group, the nation’s leading provider of specialty insurance programs, ATP has been partnering with agents for more than 15 years to deliver highly successful programs that provide the unique coverages addiction treatment and mental health facilities need — empowering providers to focus on helping those who need it most. To learn more, visit atpinsure.com or contact Krista at KHMayes@nsminc.com.