The New York malpractice landscape is unique and can present challenges for many physicians. New York has not had success in passing meaningful tort reforms, and the state has only three admitted carriers â€“ Physicians Reciprocal Insurance (PRI), MLMIC Insurance Co. and The Doctors Company. In recent years, standard medical professional liability insurance companiesâ€”better known outside of New Yorkâ€”have founded risk retention groups (RRGs) with the intent of entering the state. An RRG is an alternative risk transfer mechanism permitted under the Federal Risk Retention Act of 1986 that provides insurance coverage for individuals participating in a similar business. Those companies are only subject to the insurance rules and regulations of the state in which they are domiciled, but can register and engage in the business of insurance in all states.
Traditionally, the downside of being covered by an RRG is that its insureds must make a large capital contribution to establish reserves and have no access to a stateâ€™s guaranty fund should the RRG be unable to meet its obligations. The new RRG options available in the state have been funded and reinsured by their parent company, eliminating some of the risks associated with RRGs.
While the entrance of RRGs into the market has been New Yorkâ€™s dominant medical liability story during recent years, 2018 saw two significant moves by admitted medical professional liability insurers. Longtime New York insurer of medical liability MLMIC Insurance Co. completed its conversion from a property-and-casualty mutual insurance company to a property-and-casualty stock insurance company, finalizing its $2.5 billion acquisition by National Indemnity Co., a subsidiary of Berkshire Hathaway Inc. As a subsidiary of Berkshire Hathaway, MLMIC will have enhanced capacity and financial strength to continue serving New York State physicians, hospitals and dentists. And after entering the New York admitted market in 2017, medical professional liability insurer The Doctors Company announced an agreement to purchase Hospitals Insurance Co. (HIC) and its third-party administer FOJP Service Corp. from Mount Sinai Health System, Montefiore Health System and Maimonides Medical Center for $650 million, further expanding its footprint in New York.
Another unique facet of the New York market is the prevalence of occurrence policies, which are quite common. Occurrence policies differ from claims-made because they cover a physician for any incident that happens during the policy period, regardless of when the claim is filed. Occurrence policies will continue to provide this coverage even after a policy has been cancelled. Physicians who have an occurrence policy will not need to purchase tail insurance if they leave their carrier. However, occurrence policies are more expensive than the more common claims-made policies. Claims-made policies only cover incidents that occur during the policy period if the claim was also made while the policy is still in force. Otherwise, the physician would need prior acts coverage for protection against such claims.