This information is not to be considered policy language or legal advice and is not a substitute for competent insurance and legal assistance from a licensed insurance agent or attorney, respectively. The information contained is general in nature, and is designed to provide guidance in the understanding of terms used, both in this web site, and by the insurance industry as a whole. Each company may interpret definitions slightly different, and these do not reflect the opinions of any one company.
Q. What is the difference between Claims-Made and Occurrence Form Policies?
A. Most professional liability insurance polices today are written on a claims-made form vs. occurrence form. Under this policy, you are protected for claims that meet two conditions – they must be reported while the coverage is still in force and occur subsequent to the retroactive date, also known as prior acts date. The coverage period of your policy begins with the retroactive date and ends with the cancellation date. o An Occurrence policy provides for coverage which occurs during the policy period regardless of when the claim was made. It is very rare for this type of policy to be written by a professional liability carrier.
Q. What is a Nonassessable vs. Assessable policy?
A. Assessable insurance carriers reserve the right to charge or “assess” policyholders an additional premium in the event the carrier’s losses exceed premium income. This may occur with trust companies, state insurance and or retention groups. With traditional “stock” companies, your financial obligation begins and ends with your yearly premium – you will never have an assessed fee.
Q. What is Step-Rating and how does it affect my premium?
A. For policies issued with the same effective date and retroactive date, most claims-made policies involve a five to eight-year step rating approach. The first year, the premium is lower, with progressively increasing premiums up to year five or eight to compensate for the longer reporting period. Upon reaching the mature rate, premiums remain level except for Company-wide increases or decreases.
Q. What is the proposed effective date?
A. The date current insurance expires or, if not currently insured, the date the firm would like coverage to go into effect, subject to underwriting approval.
Q. What is the retroactive date?
A. Also known as “prior acts date”, is the earliest date that the firm has had continuous claims-made coverage. Some carriers require a specific date on all policies. For non-medical professional liability insurance you may see ‘”full” or “no date limitation applies” on some carriers’ declarations page. If the firm has “full” prior acts coverage from their current carrier, most companies will consider using the same language or use the date the firm was established as the retroactive date. It is important that you verify your retroactive date so that there will be no lapse in coverage. Claims made coverage means coverage for claims resulting from injury occurring after the retroactive date, provided the claim is reported to the carrier while the policy is in force.
Q. Do I Need Retroactive Coverage?
A. Yes. Without retroactive coverage, any procedure or professional service rendered prior to the effective date will not be covered. Prior acts coverage is typically available (subject to underwriting) when transferring from another claims-made policy. With this option, you do not have to purchase costly tail coverage from your prior insurance company. • What limit and deductible should I choose? o No one can advise you specifically on how much insurance to purchase. There is an array of options available. Single limit options provide one limit that applies to per claim and is also the aggregate (total) limit for the policy period. o Split limit options are commonly offered in medical professional liability. As an example, $250,000/$750,000, $500,000/$1,500,000 and $1,000,000/$3,000,000. The first limit denotes the limit amount you have available for any one claim. The second limit denotes the limit amount you have available in the aggregate per policy period. Your insurance company will not pay out more than the aggregate limit in any one year, regardless of the number of claims.
Q. Claim expenses inside or outside the limit of liability?
A. Some carriers allow you to choose between two limit options. If you select Claim Expenses within the limit, your limit of liability will be reduced by damages and/or claim expenses. Or, you may select an Additional Limit for Claim Expenses which provides one limit for damages and another limit for claim expenses. Most medical professional liability carriers offer claims expenses outside the limit of liability but may vary depending on carrier.
Q. Loss and Expense Deductible vs. Loss Only Deductible?
A. With a Loss and Expense Deductible you will pay all damages and claim expenses up to the amount of your deductible. A Loss Only Deductible minimizes your out of pocket expenses for frivolous claims. You pay your deductible only if damages are assessed against you. Typically, there are no deductibles in medical professional liability. Please refer to your policy for terms and conditions.
Q. Do I qualify for a Medical Society Credit?
A. Medical Society credits varies with each carrier. Some carriers may provide credits for CME’s or Risk Management Seminar participation every two years to include correspondence courses. Credits vary by insurance carrier and in some instances additional credits may be allowed.
Q. Do I qualify for a New Physician Credit?
A. If you have completed your educational requirements and a fellowship, internship or residency and are just starting to provide services, you may be entitled to higher discounts. These discounts vary by insurance company.
Q. What is a part time credit?
A. With most carriers, part time coverage is defined as 1,040 hours annually providing services, or 20 hours of less per week. o The FMMJUA defines part time by days worked vs hours. If you were to work (1) day out of the week, you would earn 75% credit. Two days 50% credit and Three days 25%. Four days or greater is considered full time.
Q. New Doctor Discount
A. Qualifying professionals receive a 65% discount on first-year policy premiums, a 30% discount on second-year rates, and 15% on third year rates. Those completing a military or public service obligation as remuneration for medical school tuition are also eligible for this discount.
Q. Loss-Free Discounts
A. Loss-free Discounts range from 10%-25% and are based on the number of years without a claim in excess of $25,000 or an indemnity reserve of $100,000 or more.
Q. Tail Coverage
A. Most carriers provide prior acts coverage when transferring from another claims-made policy. This means the new carrier will pick up coverage from the retroactive coverage date provided under your current professional liability policy; anything before that retro date will not be covered. If the new carrier does not pick up prior acts coverage, you must purchase tail from your expiring carrier.
Tail coverage, also known as an extended reporting endorsement, is a supplement to a claims-made policy that provides for any incident that occurred while the claims-made insurance was in effect but had not been brought as a claim by the time the insurerpolicyholder relationship terminated.
The reporting period for Tail Coverage, can be for a one (1) year to unlimited. Refer to your policy for terms and conditions.
Q. Do I need to disclose incidents that were reported to our current carrier?
A. Yes. Potential claims or incidents which may give rise to a claim must be reported to the current carrier as well as new carrier. Failure to report the claim under the current claims-made policy could result in uninsured claims thus “self” insuring. No coverage will be provided by the new carrier for incidents resulting in claims which are known prior to the inception of the coverage. This is consistent with most carriers.
Q. Free Tail Coverage
A. Usually available with medical professional liability. Free tail is usually available for death or disability, or upon retirement after being with the company for five consecutive years.