Perfusion Liability Insurance – Professional Liability Insurance Primer

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Whether you’re the owner of company or an independent contractor, professional liability insurance is typically the last thing on your mind. During my time in the U.S. Army and as a trauma and burns R.N. my focus, like yours, was on improving my technical skills, keeping up with the latest protocols and making sure I gave every patient the best care possible. It never occurred to me that if my professional actions had harmful consequences to a patient that I could be held personally liable and fortunately for me, it was never an issue.

With the litigious climate of today’s society, properly protecting yourself and your business from real or perceived negligence could mean the difference between financial ruin and a long successful career. While there are many nuances to professional liability insurance, the focus here is to give a basic overview of what medical professional liability is, why a perfusionist needs it and the kinds of policies available. We’ll also review some common pitfalls that could leave you unprotected in the unfortunate event you find yourself on the business end of a law suit.

What is Professional Liability and Why Do You Need It?
Professional Liability for medical service providers is typically called “medical malpractice” and can be best summed up as an insurance that protects for real or perceived errors, omissions or negligence during their scope of work. As a perfusionist, you are, “in the eyes of court,” held to a higher standard of competence due to extensive training, knowledge and technical expertise. This is why as a perfusionist you should consider a professional liability policy and not a standard “general liability” insurance policy which typically excludes professional business operations entirely. You may have noticed in the last paragraph where I mentioned “perceived errors, omissions or negligence”. Professional liability insurance companies don’t just pay or settle claims when there is a real error or negligence, most also reserve the right to defend you against groundless claims or for suits in which your professional actions were not negligent. Unfortunately, due to the complex nature of the types of surgical procedures perfusionists are involved in, when something goes wrong and the patient suffers harm or even death – attorneys may view everyone involved in the surgical case as a potential contributor of partial negligence. Often, everyone involved in a case will get “invited to the party” and the court may or may not sort it out. Without insurance – hiring a lawyer to defend you can get very expensive, very quickly.

What’s in The Policy and What Are Some Options?
Now that you know what it is and why it’s a good idea to have it, lets find out what’s in the policy and some of your options. The first thing you’ll want to decide is how much coverage you want. While some states have high minimum requirements, others have none at all. Keep in mind however, just because your state may not require liability insurance, this does and would not absolve you of responsibility for your professional actions.

Determining an adequate liability limit for you or your business may vary from business to business and may depend on how many cases you do annually, how many employees you have, anticipated revenue or simply how much peace of mind you want. Often you’ll see professional limits of liability shown as $1,000,000/$3,000,000, for example. Whereas the first number ($1,000,000) refers to the maximum limit of coverage for any one claim and the second number ($3,000,000) refers to the aggregate (total) amount that the policy will pay in a policy year. For example, a company or person carrying $1mm/$3mm policy would be covered for up to three $1mm losses in a single policy period (less any deducible that may apply). Additionally, those limits of coverage typically apply to the policy and not to each person covered in the policy. In cases where many perfusionists are covered under one policy, it may be wise to consider carrying a larger aggregate amount to protect against multiple losses in a policy year. Remember that many liability policies are subject to audit; insurance companies generally reserve the right to check and make sure they’ve charged you an adequate premium based on the amount of work you’ve previously estimated.

Occurrence versus Claims Made – briefly, an “occurrence” policy will provide coverage for losses that occur during a policy period but may be discovered and reported any time in the future, provided the policy was in force at the time of the loss. Because of the unlimited time to report the loss, occurrence policies offer far greater protection – but they are also come at a higher price. If you already have coverage, it’s very likely that your current policy is a “claims-made” one. Essentially you are buying the right to make a claim on a policy from year to year. The first year you buy a claims made policy will be determined as the “retroactive” date for subsequent policies. The retroactive date is a provision found in many claims-made policies that eliminates coverage for injuries or damage that occurred prior to a specified date even if the claim is first made during the policy period. As long as there are no lapses in coverage from year to year, your policy should cover you for claims that occurred after the retroactive date – even if they are discovered and reported in a later policy period.

When purchasing or comparing claims made policies, be aware of “tail” options. Tails are also known as extended reporting periods (ERP’s) – a common misconception is that ‘tails’ extend the coverage, in fact – all they do is extend the amount of time you have to discover and report a claim or loss, the loss still must have occurred during the time the policy was active to be covered.

Avoid the Pitfalls!
Understanding tails is important; especially if someone else (i.e. a hospital) is paying your claims-made professional liability premium. If you leave the hospital to enter into a private perfusion business, you should consider purchasing the tail to remain protected against potential liabilities incurred while working at the hospital. Either ask your previous employer about tail options or talk to your new insurance provider and ask if they will extend coverage back to the retroactive date on the policy that was provided to you by the hospital. Be aware however, if the new company is willing to offer the coverage, you’ll almost certainly need to provide proof of the prior coverage.

All insurance companies and all insurance policies are not the same. When shopping for insurance you should expect an agent to give you a balanced presentation of both the positive and negative aspects of a given policy. Typically, a professional liability policy will set out a course of broad standard terms and conditions for a certain class of business (i.e. allied health care providers) and then through the use of endorsements, the policy is tweaked to add or remove coverages for specific classes (i.e. perfusion or nursing, etc.) Some of these endorsements could severely reduce or eliminate the coverage you think you have in place – you may not be as protected as you thought you were . One of the most shocking endorsements I’ve seen that is detrimental to coverage is called the “Uninsured/ Under-insured Healthcare Provider Limited Coverage Endorsement” which reduced the perfusionist’s coverage to those of any professional who was named in a law suit with them! What happens if the scrub tech or circulating nurse that is named in the suit doesn’t have professional liability? The insured’s $1,000,000 policy would be reduced to a maximum of $100,000. Others endorsements may exclude ECMO, organ transplant and even pediatric services entirely.

Before purchasing a policy simply because it’s a little less expensive, find out why – there could be a good reason! If you see something that doesn’t add up or you don’t understand, ask your agent to explain it and don’t be afraid to ask for explanation or confirmation in writing. Lastly, make certain that your new policy is with an insurance carrier that is rated at least an “A”  IX through A.M. Best.   A.M. Best is widely considered the  gold standard for determining the financial solvency and stability of a particular insurance company. To enhance the usefulness of ratings, A.M. Best assigns each rated (A++ through D) insurance company a Financial Size Category. The FSC helps consumers understand the financial size of the rated carrier, “I” being the smallest through “XV”, the largest. For many companies, insurance can be one of the largest out-of-pocket expenses outside of ordinary payroll. Remember these tips when it comes to shopping or purchasing professional liability insurance:

  • Speak to a couple of different agents when obtaining quotes to make sure you’re getting the best coverage and the best price. You’d be surprised at the number of professionals who pay far more than they should due to long-standing loyalties and the inconvenience of the “shopping” process.
  • When making decisions on different proposals, remember to make sure you’re comparing ‘apples to apples’ and that there are no limiting endorsements that may surprise you later.
  • Remember that your policy may be audited by the carrier, so accurate projections are necessary to help avoid having a costly bill due later.
  • Ask for options (i.e. including general liability, incidental non owned auto or employment related practices coverage). You may be surprised to know that sometimes these can be added too your professional liability for little or no cost.
  • Make certain your carrier is an A.M. Best rated carrier – some hospitals may not accept the insurance if they do not meet certain financial sizes or carry a rating less than “A.”
  • Understand what you are buying and don’t make assumptions when it comes to coverages; ask the agent to explain any concern or how a policy would respond in a given scenario.
  • Don’t be afraid to ask the agent for referrals.
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