Understanding The Unique Language Used In Medical Malpractice Liability Insurance

The professional medical liability industry uses some unique terms (lingo) that are critical in interpreting the provisions of its insurance policies. Most doctors encounter at least one malpractice suit during their careers. Most states mandate that physicians maintain professional liability coverage. We will explain some of most industry-specific and often misunderstood terms used in Pennsylvania’s medical liability industry.

Claims Made vs Occurrence Policies: “Claims made” policies cover medical providers exclusively during the policy term. If a policy is canceled or expires, it would not apply to claims filed in the future for negligent acts that occurred during the prior policy period. Occurrence policies are generally preferred because if a policy is canceled or expired, you remain eligible to present claims from acts that occurred during that policy term.

Annual Aggregate Limit: The maximum annual amount an insurance company will pay in liability coverage for a medical provider. For example, Pennsylvania physicians are required to maintain a minimum of $500,000 per occurrence and $1,500,000 per annual aggregate.

Consent to Settle Clause: A policy provision that does not allow insurers to settle claims without medical provider approval (consent). Insurers generally handle claims according to what they deem as the most cost-effective means of resolution, which may run contrary to a medical provider’s wishes. Providers may want to defend claims instead of settling to protect their reputation professionally and avoid potentially higher insurance premiums in the future.

“Hammer” Clause: Provisions may exist that have consequences for a medical provider defendant who refuses a settlement amount that the insurance company recommends. The provisions may include that an insurer is released from responsibility for the additional costs of defending the claim after the provider denies a settlement recommendation. Another is that if the provider denies the initial settlement recommendation from the insurer and the claim settles later for a higher dollar amount, the insurer is not responsible for the excess amount beyond that of the initial settlement recommendation amount.

Cyber Liability Coverage: Most medical providers have electronic systems containing sensitive data and patient personal information. This coverage applies if critical data is breached from technical malfunctions, viruses, or access by “hackers” etc. There have been massive breaches allowing criminal access to sensitive data including social security numbers at medical organizations recently.

First Dollar Coverage: Means that a medical provider has coverage that does not require paying deductibles, or other “out-of-pocket” expenses if a claim occurs.

Locum Tenens Coverage: “Locum tenens” is derived from Latin meaning “in the place of, or as a substitute”. This refers to coverage that will extend to a substitute physician who is temporarily “filling in” for you, such as during a vacation period.

Slot Coverage: More affordable designed for professionals working on a part-time or limited basis.

Extended Reporting Period (ERP) or “Tail” Coverage: This is generally termed as “extended reporting coverage” in Pennsylvania. It covers malpractice claims brought against a provider for acts that occurred in the past when insured under a different policy.