Tips for shopping for medical liability insurance coverage
What Is medical liability insurance?
Medical liability insurance – commonly called medical malpractice insurance – covers a health care provider for errors arising from the medical practice.
These policies pay defense costs and generally cover claims for medical error or neglect, even if the claims are false or groundless. However, intentional and criminal acts are not covered, although some policies may pay defense costs until the nature of the underlying act is determined.
Claims-made versus occurrence policies
An "occurrence" policy covers claims arising from events occurring while the policy is in force, regardless of when the claim is first made.
A "claims-made" policy covers claims reported during the policy term if the event occurred after the effective date of the first policy issued. The policy may specify a retroactive date to cover acts occurring before the original effective date.
How to change claims-made medical liability insurance carriers
If you change insurers, be sure to take measures to prevent coverage gaps. Either purchase run-off ("tail") coverage from the old carrier or buy prior acts ("nose" or retroactive) coverage from the new one. Prior acts coverage sets a retroactive date, which allows the current policy to provide coverage back to the original effective date of your first policy.
Tips for renewing coverage
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Start the renewal process early. Six months in advance is not too soon to assemble information.
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If you use an agent, respond quickly to requests for information. Be sure to document all communication with your agent. Especially note key items such as policy limits, deductibles, requested effective date, prior acts coverage, etc.
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Update and document all patient safety and loss control measures including employee training accomplished. Be prepared to show why your practice is, and will continue to be, a good risk.
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Consider assuming more risk in the form of higher deductibles or lower policy limits. However, check first with your hospitals and HMO's for their credentialing requirements.
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Be proactive. Provide your agent or insurance markets with loss runs, coverage choices, and risk management efforts at least four months in advance. Texas statutes require an insurer to give 90 days notice of nonrenewal, so underwriters need this information well in advance.
How do I handle my policy when nearing retirement or leaving practice
Be certain that you have tail coverage. Plan in advance, because the coverage is expensive and may cost as much as one and a half to three times an annual premium.
Most insurers have a plan that allows an insured to receive free run-off coverage in exchange for continuous coverage for a stated period (usually five or more years) when reaching retirement age and ceasing practice permanently.
There may also be arrangements that can be made if a health care provider is called to active duty in the armed forces.
Check with your insurer to see if these options are available.
Texas Department of Insurance
If you have a complaint, call your agent or insurer. Insurers list a toll free phone number in their policies. You may call the TDI Consumer Information Line at 800-252-3439 and request a complaint form. Alternatively, visit the TDI web site at Insurance Complaint Process and follow the directions to submit a complaint on line.
What kinds of insurers offer medical liability insurance?
Four kinds of insurers may offer medical liability insurance to health care providers in Texas. They are listed below.
To check on whether a carrier has legal standing in Texas, call TDI Consumer Protection at 800-252-3439, or visit the Company Profiles website at Insurer Search.
1. Licensed and/or legislatively authorized insurers
Licensed insurance companies - TDI regulates the policy forms and rates of licensed medical liability insurers. Medical liability policies offered by licensed insurers must contain the following legislatively mandated provisions:
- Coverage may not be cancelled by the insurer after 90 days from the effective date of the policy;
- Minimum 90 days notice of nonrenewal or premium increase, including written reasons for such action; and,
- No surcharge for claims may be assessed unless the claims have been paid.
Texans obtaining malpractice insurance from licensed insurers are protected by the Texas Property and Casualty Insurance Guaranty Association, for up to $300,000 per claim, if the carrier becomes insolvent. Check with a purchasing group insurer for its Guaranty Fund status. See the discussion on purchasing groups below. View licensed medical liability insurers at Professional Liability Admitted Carriers in Texas
These legislatively created entities also offer medical malpractice insurance:
JUA (Texas Medical Liability Insurance Underwriting Association) – Established by the Legislature in 1975 to insure physicians and other eligible health care providers who cannot obtain insurance in the voluntary market.
TDI regulates the policy forms and rates of the JUA. The JUA does not participate in the guaranty association, but its member insurance companies and policyholders may be assessed to maintain solvency. Information on the JUA is on the JUA Resources area on the TDI website.
Texas Medical Liability Trust (TMLT) – Established under a 1977 statute that authorizes a statewide association of physicians or of dentists to create a trust to self-insure its members. The Texas Medical Association formed TMLT in 1978 for this purpose. By statute, only members of the founding association may obtain insurance from the TMLT.
TMLT files its rates and policy forms with TDI for information purposes only. TMLT submits an audited annual financial statement to the Texas Department of Insurance for review. However, the Trust does not participate in the guaranty association. Visit the TMLT web site at www.tmlt.org/tmlt.html.
2. Medical professional liability funds for state higher education systems
Chapter 59 of the Education Code permits the establishment of separate self-funded plans to cover the professional liability of medical staff or students at certain institutions: University of Texas System, Texas A & M University System, Texas Tech University Health Sciences Center, and University of North Texas Health Science Center at Fort Worth. These funds are not subject to the Insurance Code and are not regulated by the Texas Department of Insurance. They do not participate in the guaranty association. Medical staff should contact their individual university for information.
3. Surplus lines insurers
Insurance not available through licensed insurers may be placed with eligible surplus lines insurers. These insurers must be licensed in their home country or state to sell the kind of insurance they sell in Texas. They must also be on TDI's "eligible list" to conduct insurance business in Texas. Surplus lines insurance is purchased from agents licensed by TDI to sell this type of insurance. Before selling a surplus lines policy, however, the agent must make a diligent effort to find a licensed insurer to issue the policy.
What You Should Know About Surplus Lines Insurers/Policies
- It is common for surplus lines insurers to retain a significant portion of the premium in the event the insured cancels the policy midterm.
- Texas laws regarding notice of cancellation, nonrenewal or premium increases do not apply to these insurers.
- Defense costs could be included within the limit of liability and tail or nose coverage may not be available.
- In some cases, a surplus lines insurer can cancel before a policy's renewal date.
- Surplus lines rates and policy forms are not regulated and the policy may be more restrictive than those that are subject to TDI review.
- TDI does not audit the finances of surplus lines insurers.
- In the event a surplus lines insurer becomes insolvent, there is no guaranty association protection for insureds.
The Surplus Lines Stamping Office of Texas has additional information at its web site www.sltx.org.
4. Risk purchasing and risk retention proups
Risk purchasing groups are formed under the provisions of the federal Liability Risk Retention Act (LRRA) of 1986. A purchasing group consists of individuals or firms of like characteristics who share similar insurance needs. The eligibility criteria for members of a purchasing group are set by the LRRA. Once formed and registered with the State of Texas, the group may use its purchasing power to obtain malpractice insurance and benefits at prices lower than individuals or businesses could negotiate separately.
If a purchasing group buys insurance from a licensed insurer, it may be eligible for guaranty association protection if the insurer has capital and surplus of $25 million or more at policy issue. If the purchasing group is not eligible for guaranty association protection, then it must disclose this to its members.
Licensed insurers that provide coverage to members through a purchasing group must file policy forms and rates with TDI. The policies and rates must comply with all statutes that apply to licensed insurers.
Risk retention groups also are formed under the provisions of the federal Liability Risk Retention Act (LRRA) for the purpose of providing insurance. To be registered in Texas, a risk retention group must be licensed as an insurance company in its home state. As the name implies, these groups do not buy commercial insurance policies, but "retain" the risk within the group. In effect, the members insure each other against liability claims and lawsuits. However, because a risk retention group is an insurer, it may purchase reinsurance. This is a form of insurance that companies buy to cede part of their risk or spread losses over several years.
The rates and policy forms of risk retention groups are not regulated, and risk retention groups are not covered by a guaranty association.