The FAQs About Professional Liability Insurance

If your career in health care is the road, then your job as an occupational therapist is the vehicle that you've chosen to carry you along that road.

And just as you insure your car against the costly expenses associated with traffic accidents, many experts say it makes sense-especially in today's risky health care environment-to protect your assets and your livelihood against charges of negligence with your own professional liability insurance policy.

Nevertheless, many health care professionals hold mistaken beliefs about the need for such insurance, so ADVANCE asked two experts for help in clearing up some of the confusion.

Martin L. Khoury, Esq., is a medical malpractice attorney with Quintairos, Prieto, Wood & Boyer, P.A., in Miami, and Mike Loughran is executive vice president of Healthcare Providers Service Organization (HPSO). HPSO is based in Hatboro, PA, and offers professional liability insurance to over 70 allied health care professions.

ADVANCE: Some allied health care professionals believe they don't need their own policies because they're covered by their facilities' insurance policies.

Khoury: The duty of an insurance company is contractual. The company's primary duty is to defend the person or entity named on the policy. Employees are covered in most states under the theory of vicarious liability, meaning the employer is liable for an employee's acts done within the course and scope of employment. But there is no guarantee that a professional will not be named individually in a suit and require a separate defense attorney.

Having said that, as a general rule, the greater the amount of independent judgment a professional must exercise in the performance of her duties, the greater the need to be separately insured. Similarly, once a respiratory therapist or occupational therapist leaves the hospital or clinic setting to give home health or independently contracted services, separate insurance ought to be obtained.

Loughran: All allied health care professionals should consider purchasing their own professional liability insurance policies. All licensed or certified health care professionals have risk associated with their professional duties.

Health care professionals need to understand that the coverage [provided by the facility's policy] may be limited and will focus on their employers' interests first. Further, health care professionals who choose to rely on their employers' coverage need to consider a number of questions: What happens if they leave those employers to work somewhere else or to spend time at home? What happens if they are then named in lawsuits for things that happened before they left their jobs?

What happens if you are sued for an incident that occurred while you were employed at a facility that no longer exists? All these situations have the potential to leave a health care professional vulnerable.

One of the primary benefits to carrying your own policy is that in the event of a lawsuit, your insurance provider will ensure that you and your interests are protected. In addition, wherever your career takes you, your policy will go with you. Whether you have a second job, volunteer, give advice to a friend or neighbor, or move or change jobs, your own professional liability insurance policy is there to protect you when you are providing professional services.

ADVANCE: What are some other reasons that professionals don't carry their own liability insurance coverage?

Loughran: There are two issues that people perceive as being negatives to buying their own policies. One is expense. Many don't realize that a professional liability insurance policy for an individual health care professional only costs, on average, $120 a year for up to $1 million in coverage per covered claim.

The second is the health care provider's perceived fear of being sued because he carries his own policy. The truth is, no one can know that an individual health care professional has purchased his own policy. If there is a lawsuit, this information will not be uncovered until the "discovery phase" of the trial. At that point, the individual will already have been named in the suit.

Instead, health care professionals should ask themselves, "What if I don't have enough coverage and I'm sued?"

ADVANCE: What are the chances that a typical allied health care professional will be sued during her career?

Khoury: I have seen a greater frequency of health care professionals being brought before their governing bodies, like the Board of Nurses. A professional's conduct does not have to be negligent for a lawsuit to cause an investigation resulting in action by the state against the professional's license.

Loughran: Having to use your professional liability insurance policy is unpredictable. The real question is, is there risk of being sued? And the answer is, yes. If a patient perceives she has been injured [as the] result of a health care professional providing, or failing to provide, professional services, that patient could sue. This doesn't automatically mean that the health care professional has been negligent. It means that the patient perceives negligence.

ADVANCE: How much professional liability insurance coverage should health care professionals carry?

Khoury: Not to be overly lawyerly, but coverage should be as high as one can practically afford. Coverage of $1 million per incident is reasonable, but perhaps should be higher depending on the job duties of the professional.

Loughran: That's a personal decision. Most health care professionals will look for $1 million in coverage per covered claim, which is our customary coverage limit. Employers who require employees to carry their own individual professional liability policies often require $1 million in coverage per covered claim. Each individual would have to evaluate his or her needs along with the costs.

ADVANCE: How much does a typical professional liability insurance policy cost?

Loughran: The risks attributed to each health care professional differ from one practitioner to another, and determine the rate of the premium. These rates also vary by limits of liability, whether the practitioner is employed or self-employed, and in some cases by state.

As mentioned before, the average cost for a policy is $120 a year for up to $1 million in coverage per covered claim.

ADVANCE: What should a good-quality professional liability policy cover?

Khoury: A policy should cover a professional for negligence (unintentional acts) in the execution of her duties that cause harm to a patient and result in litigation in which the professional is named as a party. The policy will cover the cost of litigation and any adverse judgments.

If notified the state is taking licensure action, the professional's insurance should also cover the cost of retaining a lawyer who specializes in defense against administrative actions. This can be quite costly, and if she is uninsured, the costs of defense will come out of the professional's pocket. I have seen nurses simply surrender their licenses, not because they believed they did anything wrong, but because they simply could not afford the cost of defending the license in an administrative action.

Loughran: A good policy should offer you protection against covered allegations of professional malpractice. Malpractice defense costs are typically paid in addition to the limits of liability. A good policy should also offer additional coverages without additional costdeposition representation, for example, or license protection in the event you are faced with disciplinary action by your state board. These additional coverages are not typically included in an employer's policy.

ADVANCE: What typically is not covered by professional liability insurance policies?

Khoury: Not covered are acts outside the course and scope of practice. Intentional acts and acts outside the duties of the job usually are not covered.

Loughran: What will not be covered are criminal actions, such as a sexual assault. The coverage offered through HPSO typically will provide defense to an insured against allegations of inappropriate sexual misconduct. However, if it is determined that a criminal act was committed, there would be no indemnity paid by the policy.

ADVANCE: What should allied health care professionals be aware of when evaluating policies offered by different companies?

Loughran: Health care professionals should examine several aspects of each company they are considering. First, evaluate the financial strength and stability of a company. Second, you want to know how long the company has been providing insurance services to health care professionals. We also recommend that you assess the company's service and level of professionalism.

And finally, learn what the policy offers. Is it a claims-made policy or an occurrence policy? Does it offer other coverage features in addition to professional liability? Are there extra costs for these additional coverages? What are the limits of liability? All of these issues should factor into your decision when you purchase a professional liability insurance policy.

ADVANCE: What is the most important thing that you think professionals should know when it comes to professional liability insurance?

Loughran: The most important thing is the knowledge that it is your policy. You gain peace of mind knowing your own professional liability insurance policy is there to protect you. And that you, your license and your interests will be defended if you are accused of malpractice.

Your own policy also offers portability. Wherever your career takes you, your policy will go with you even if you work at a second job, volunteer, give advice to a friend or neighbor, move or change jobs.

Khoury: A professional license is much more valuable than any car or boat, and ought to be protected to a commensurate degree. I would never discourage anyone from obtaining adequate liability insurance protection.

Joseph F. Jalkiewicz is an ADVANCE consulting editor.

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