Good news for doctors! The State of Florida reports about a 3% drop in medical malpractice premiums during 2006–and this trend appears to continue this year. Everyone in the medical field remembers the medical malpractice (also known as med mal) crisis about five years ago. In 2003 tort reforms passed by the Florida legislature placed caps only on non-economic damages commonly referred to as “pain and suffering.” Claims against physicians for pain and suffering were capped at $500,000, and healthcare facilities or hospitals were capped at $750,000.
Insurance rate stabilization is important for all businesses but especially for doctors. Their premiums tend to be very large portion of their business cost. During the med mal crisis, many Florida doctors moved to other states where the rates were more favorable. This made Florida’s doctor shortage even more acute.
That trend is reversed today due to increased competition among med mal insurance companies. Florida now has about 30 companies writing in Florida. With this many companies stimulating competition, the rates should continue to decline. Some med mal companies are nonprofit and owned by doctors. I represent one of the companies and find this concept very stable and strong. I have noticed premium discounts on certain types of doctors of 10 to 15%. Certain doctor groups can receive up to 20% break, depending on their specialty.
Full-time physicians with hospital staff privileges are required to comply with a financial responsibility outlined in the Florida Statutes. The requirements are (1) use an escrow account (2) secure a letter of credit, (3) obtain malpractice insurance with a minimum amount of $250,000 per claim and $750,000 annual aggregate. If the physician has no hospital staff privileges, $100,000 per claim is the minimum malpractice requirement.
Emergency room physicians could fall under Florida’s sovereign immunity law if new legislation passes next session. It would cap these physicians’ medical malpractice claims at $100,000 per person. To receive additional compensation, a claimant would have to get a special bill passed by the legislature.
It’s interesting to follow med mal’s claim timeframes. The Bureau of Justice reports that between 2000 and 2004, 95% of medical malpractice insurance claims are settled prior to trial. In Florida an average of 15 months passes before a claimant reports an injury to the insurance provider. An average of 28 months passes before these claims are closed and the claimants receive compensation. This works out to be about four years from date of incident to date of settlement.
Timeframes are important because of the way medical malpractice policies are issued. Medical malpractice policies are issued on a claims-made basis, which means that claims are normally covered when they are reported during the policy year, no matter when the act actually took place.
Coverage for acts occurring prior to the policy period is called “prior-acts coverage,” and the period prior to the policy period for which claims are covered is called the “prior-acts period.” Prior-acts coverage is usually only provided when a claims-made policy has been in force immediately prior to the current claims-made policy. Prior-acts coverage is defined as “full-prior acts,” covering acts occurring at any time prior to the current policy period, or is defined by a “retroactive date.” When a retroactive date is used, prior-acts coverage is provided only from the retroactive date to the current policy period.
“Tail coverage,” also called an “extended-reporting period,” provides protection for claims that are filed after a claims-made policy has been non-renewed or canceled. This coverage is optional, and the need can arise if the professional organization is acquired or goes out of business, or a decision is made not to purchase insurance. The terms and pricing for tail coverage vary greatly and are usually defined in the policy.
Have I confused you yet? Here’s something else to consider: unlike the homeowners policies, which are almost identical with every company in Florida, there is no standard policy form for the claims-made policy. There can be a big difference in the policy’s wording from company to company. These policies are complex and complicated. When purchasing this type of coverage you should use an insurance agent or risk manager who is knowledgeable and has experience in this field.
Other professionals like architects, engineers, attorneys, and even insurance agents also have professional liability insurance. For your protection whenever dealing with professionals, make sure they carry professional liability insurance. It’s your responsibility to do so!