Answers to the Most Common Med-Mal Insurance Questions

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There are numerous considerations to keep in mind when selecting your Medical Liability Insurance. We here at Cunningham Group believe it’s important that physicians have a resource that they can refer to when determining which insurance company to go with, what their limits should be, what type of policy to get, and other factors that need to be considered. This is why we have created a Medical Malpractice Insurance Knowledge Center below.

  • Why did you retire My Medical Malpractice Insurance.com?
    The team behind MyMedicalMalpracticeInsurance.com (MMMI) is still in place and is helping out healthcare professionals all over the country secure the lowest priced medical malpractice insurance possible. We just decided to move the content from MMMI to our parent company website. Same people, same great low prices and exactly the same great customer service you have come to expect from us.
  • Who do we provide insurance for?
    We provide Malpractice Insurance for Physicians/Surgeons, Surgery Centers, Dialysis Centers, Ambulatory Surgery Centers, Cancer Treatment Centers, MRI/X-Ray Imaging Centers, Urgent Care Centers, Behavioral Health Facilities, Nurse-Midwives and all the healthcare professionals.
  • After I fill out the form, what happens next?
    We will contact you within 24 hours (either via email or telephone) for MD/DO coverage and provide a premium indication from the top-rated insurers in your state. For facility coverage, we will make every effort to provide a premium indication to you within 24 hours, however, dependent upon the types of procedures your facility is performing, it could take an additional one or two days.
  • What if I don't place my insurance with you, can I still take advantage of your services?
    Yes, as long as you provide a copy of your Medical Malpractice Insurance Policy each year.
  • What are the different types of Medical Malpractice Insurance Companies?

    There are various types of insurance companies and other sources for purchasing medical liability insurance. The most standard are described below:

    Physician-owned carriers: Owned by the physician-insureds of the company. Most states at one time had access to a physician-owned company. However, we have recently seen many of these companies change to publicly traded stock companies.
    Commercial carriers: Owned by stockholders.
    Risk Retention Groups: Formed as an insurance company under the Risk Retention Act of 1986, must follow the insurance laws of at least the state in which it is domiciled. A capital contribution is generally required when joining a risk retention group.
    Risk Purchasing Group: An association of insurance buyers with a common identity who join together to purchase insurance as a group.
    Joint Underwriting Association: A JUA is a state-sponsored insurer of last resort for physicians unable to obtain coverage from another insurer. Policies are generally assessable by the insured and/or all casualty insurers operating in the state.
    When choosing an insurance carrier, physicians should examine whether or not the company is regulated by the state in which they practice and if they are eligible for coverage under the state guarantee fund in the event of insolvency of the company.

  • What is Claims-Made Coverage?
    This type of policy covers a physician for incidents that take place and are reported to the company after the initial date of claims-made coverage (retroactive date), as long as the policy is still in force. Because claims-made insurance only provides coverage for incidents reported while the policy is in force, upon termination of a claims-made policy, a physician needs to purchase extended reporting (tail) coverage. This ensures that insurance coverage will be provided for claims that arise after the termination of coverage for incidents that occurred while the claims-made policy was in force. An alternative to purchasing tail coverage is to purchase prior acts (retroactive) coverage when converting insurance coverage from one insurance company to another. Before purchasing a claims-made policy, physicians should make sure that the right to purchase tail coverage is guaranteed. With claims made policies, premiums in the first year of coverage are substantially lower than for subsequent years or the traditional occurrence type insurance. The premium gradually increases over a period of years (4 to 7 depending on the company) until a mature claims-made premium is reached, exclusive of rate increases for other reasons, such as loss experience. At the mature level, premiums then change only if the company adjusts premiums overall due to claim experience.
  • What is Occurrence Coverage?
    An occurrence insurance policy covers a physician for any incidents that occur while the policy is in force, regardless of when a claim is made or reported. Because of the nature of occurrence coverage and the long-tail nature of medical malpractice, premiums for occurrence coverage can be substantially higher than for claims made. Since economic damages can increase dramatically between the time an incident takes place and the time a claim is made, it becomes difficult for companies to adequately assess the impact of inflation and other factors that affect claim settlements and judgments. This can cause companies to cautiously set premiums higher than need be or to jeopardize their financial stability if premiums are not adequate. Most insurance companies do not offer occurrence type medical malpractice insurance, preferring the perceived more stable claims-made form.
  • What is a Consent to Settle Clause?
    This clause on a malpractice insurance policy will determine who has the final decision in settling a claim versus going to trial. Consent to the insured is preferable as it puts the final decision to settle a claim in the insured’s hands, not the insurance carrier. Some policies provide Consent to settle to the insurance carrier only. In some instances, policies may give the insured Consent to settle, however they may contain a Hammer Clause which is a provision that holds the insured responsible for any payment, indemnity or expense beyond the original offered settlement amount.
  • What are Defense Costs?

    These are the expenses associated with defending the insured against a claim and include, but are not limited to, attorney fees, court costs, legal fees and expert witness fees.

    Defense Costs Inside: – This relates to how the defense costs are paid under your policy.  If Defense Costs are inside or within the limit of liability, this will exhaust the limits of liability on the policy, leaving less available for indemnity payment.

    Defense Costs Outside: – It is preferable to have Defense Costs outside the limit of liability, then these costs are paid in addition to the limit of liability and will not exhaust your policy limit, thus leaving the full limit available for indemnity.  Defense costs outside can be unlimited or can be capped with their own separate limit.

  • What is a Claim-Trigger?

    On a claims-made policy a trigger is what constitutes a claim under your insurance policy.

    Incident Trigger: A policy is said to be incident sensitive when the company will accept an incident as if it was a claim.  This is favorable to the insured as it can give the insurance company the necessary lead time to alleviate a situation before it becomes a claim.

    Demand Trigger:  Claims-made policies with a demand trigger will only accept a formal written demand for money or suit as a claim. 
  • What is Extended Reporting Endorsement? Tail Coverage?
    An Extended Reporting Endorsement allows the insured to continue to report claims under a Claims-made policy after the policy has been terminated. In most cases, the Limit of Liability on the policy is not re-established each year, but on some policies the aggregate limit can be. The Extended Reporting Endorsement can be for an unlimited time period or purchased for a specific period i.e. 1-Year, 3-Year or 5-Year. Claims-made admitted policies offer free Reporting Endorsement for death and disability and typically have a free Reporting Endorsement in the event a physician retires completely from the practice of medicine after attaining a certain age (usually 55 or older) and has been insured continuously with the same company for a number of years. The terms of tail coverage can vary greatly from one company to another, some offering a limited number of years for reporting claims and others an unlimited reporting period. Due to the long-tail nature of medical malpractice, physicians should seek to obtain an unlimited tail reporting provision.
  • What does "Surplus" mean when talking about Medical Malpractice Insurance Carriers?
    It is the amount by which a company’s assets exceed its liabilities. This is the net worth of the company and determines its ability to assume risk and pay for unanticipated deficiencies in loss reserves.
  • What is Net Written Premium?
    This is the amount maintained by the insurance company after it has paid for reinsurance.
  • What are Loss Reserves?
    This is the amount set aside for indemnity payments and loss adjustment expenses for open claims.
  • What are Ratios?
    The ratio of net written premiums to surplus indicates the company’s ability to assume risk. Regulators suggest a ratio between 1:1 and 3:1. The closer to 1:1, the stronger the insurance company. The ratio of loss reserves (indemnity and expenses) to surplus indicates the company’s ability to cover unanticipated reserve deficiencies. The recommended ratio is 4:1. The loss ratio is the total amount of incurred losses (indemnity and expenses) as a percentage of earned premium. The expense ratio is the total amount of operating expenses as a percentage of earned premium. A combined ratio (loss and expense) of more that 100% in any given year indicates an unprofitable year and a need for some type of adjustment to reduce the combined ratio and return to profitability.
  • How are Medical Malpractice Insurance Companies Rated?
    A.M. Best Company is the leading independent analyst of the insurance industry. A.M. Best analyzes the financial and operating strength of insurance companies and awards ratings that range from “A++” (Superior) to “C-” (Weak). Other rating organizations to consider are Duff & Phelps, Moody’s, Standard & Poors’ and Weiss Research.
  • What are Direct Writers?
    These are medical malpractice companies that market and sell their products directly to the public using in-house agents/producers. Their employees also perform the day-to-day customer service functions. While this route is suitable, the independent physician loses the right to compare all insurers.
  • What are Captive Agents?
    These agents are appointed by the company to market and sell their product exclusively. They are generally prohibited from representing any other companies. Customer service functions are performed by the agents and their employees. This, as above, is satisfactory, but the doctor will not be able to "shop" his/her coverage with multiple insurers.
  • What are Independent Agents?
    These agents contract with the various insurance companies to market, sell and service their products. Some independent agents will represent only one insurance company while others will represent a number of all of the companies writing coverage in their state(s).
  • What are Allocated Loss Adjustment Expenses? (ALAE)
    These are the expenses paid for defense attorneys, expert witnesses, investigations that are particular to an individual claim.
  • What is the difference between the Per Claim Limit and the Annual Aggregate Limit on a claims-made policy?

    Per Claim Limit:  This is the maximum amount an insurer will pay on one claim under the terms of the policy.
    Annual Aggregate Limit:  This is the maximum amount the insurance company will pay for all claims that occurred during a given policy year.

  • What does "assumed premium" mean?
    This is the payment an insurance company receives for providing reinsurance for another company.
  • What is a claim?
    This is a lawsuit in which there is a demand for money.
  • What is "Claim Severity" versus “Claim Frequency”?

    Claim severity   relates to a large loss payment that a company has made on behalf of an insured.  A physician is said to have claim severity when one or more large payments have been made by the insurance company on his/her behalf.  For instance, if an insured has had a policy limit indemnity payment of $1,000,000 it would be considered claim severity.

    Claim Frequency  occurs when multiple claims have been reported in a short period of time, with or without indemnity payments being made.  Should an insured report several claims within a short period of time this would be considered claim frequency.

    Both claim severity and claims frequency are reviewed by insurance companies to determine the acceptability of a risk. 

  • What is Direct Written Premium?
    This is the insurance company's gross premium written, before deducting any premiums paid to a reinsurer.
  • What does "Earned Premium" mean?
    This is the portion of the premium that applies to an actual coverage period.
  • What are Economic Damages versus Non-economic Damages?

    Economic Damages: These are the documented, out-of-pocket damages, such as incurred medical expenses, lost wages and earnings, etc.

    Non-economic Damages:  These are payments made for pain and suffering or physical and emotional distress resulting from an injury.

  • What are "Limits"?
    The maximum amount an insurer will pay on a claim under the terms of the policy.
  • What are non-economic damages?
    These are payments made for pain and suffering.
  • What are "Premium Discounts"?
    These are discounts applied to your insurance premium for having a favorable claim history, taking steps to reduce your risk such as completing risk management coursework or seminars or for membership in an association or sponsored program.
  • Why is it important for a medical malpractice insurance company to be financially stable?
    An insurer should maintain ample capital and underwriting and pricing discipline to protect it from failure. The rating agencies and the company’s annual report are the best tools to use to evaluate this aspect.
  • What is a carrier's Performance Record?
    A medical liability insurance company should be licensed and admitted in the state in which it is providing coverage. This will assure that it is being regulated by the state department of insurance, which can provide information regarding its compliance with state insurance laws and regulations, as well as about any complaints lodged against the company.