Insurance contracts can be confusing to navigate, whether they relate to car, travel or in this instance, your specialist medical indemnity cover. From specialist terminology to seemingly endless clauses, it’s easy to get lost. However, it is crucial that you understand the cover you ultimately opt for; there can be devastating consequences for your livelihood as a medical professional if you skip over the detail or ignore a good broker’s advice, simply opting for the cheapest option on offer.
This article will take you through some key aspects of insurance contracts, explaining clearly what they mean and how they will affect you and your business. Whilst many of the terms we refer to would be found in both claims made and claims occurring policies, this article is more geared towards those with a claims made policy. However, for the avoidance of doubt, I set out an explanation of claims made and claims occurring policies which should also assist you when deciding which insurance option is right for you.
Is your policy claims made or claims occurring?
These can be tricky concepts to understand properly; unfortunately you do need to know the basis on which your policy is written. Indeed, you should keep a record of the basis on which all your policies have been written since you first took out insurance – this becomes especially important if you swap broker and / or insurer.
A claims made policy will pay out for any valid claim made during the (typically 12-month) policy period, regardless of when the alleged malpractice actually occurred. So, all your patient interactions are covered as far back as the start date of the policy - or the retroactive date, if your policy has one. Depending on your retroactive date, this could mean your current claims made policy could cover you for claims made during the policy period which arise out of treatment you provided a number of years previously.
A claims made policy can sometimes pay out in relation to claims made after the end of the policy period – but only if your insurer has accepted a valid notification of circumstances during the policy period.
For example, you are in month 11 of your medical malpractice policy. You perform a procedure upon a patient but realise once you have started the procedure that you do not have the component you planned to use to successfully complete a hip replacement procedure. You use another component of a slightly different size and whilst the procedure goes smoothly apart from this and the outcome appears good, there is a potential for complications to develop. This is exactly the sort of situation (we see more often than you might expect!) that could give rise to a complaint and subsequent claim.
No claim is forthcoming during the current policy year, but you correctly notify the incident to your broker who in turn inform insurers. You then decide to change insurer from month 1 of the next policy year. In your proposal form for the new insurer, you are obliged to disclose issues you are aware of that could give rise to a claim.
Given you already knew about the problem, it will specifically be excluded by the new policy. That’s not a problem, however, as given you notified your previous insurer of the incident, they should cover you for any claim that is made in the future relating to these circumstances as the policy responds to “claims made” after expiry of the policy period where they arise out of a valid notification of circumstances during the policy period.
On the other hand, your policy could be written on a 'claims occurring' basis – meaning it will only pay out for claims that arise out of loss or damage that actually happen during the (typically 12-month) policy period. It even covers claims for treatment which occurs during the policy period, but does not come to light until much later. This is typically the basis on which your discretionary cover offered by the medical defence unions is written.
Retroactive Date
This can be written into your policy to set the date from when the insurer provides cover.
Whilst the inception date is when the policy started with the insurer and cover runs for a year from this date, the retroactive date sets the date from when the current insurer will accept claims, even where cover was previously provided by an alternative provider. The retroactive date initially is the inception date of the Claims-Made policy. So, if you bought a claims-made malpractice insurance policy for the very first time on 1 January 2012 then the retroactive date for your insurance policy is 1 January 2012.
As you renew that insurance policy year over year, the retroactive date stays the same – even though the policy period is moving forward.
So, at next year’s policy renewal, the new coverage period will be 1 January 2023 to 1 January 2024 with retroactive coverage back to 1 January 2012.
This means that the insurance policy will cover you for any claims made against you in the current, active policy period for treatment you provided back to patients all the way back to that initial retroactive date.
Even if you change insurer, this uninterrupted protection should be implemented by requesting the new insurer to offer an appropriate retroactive date.
Conditions precedent
A condition precedent is a clause in a contract that, if broken, may allow an insurer to deny coverage (regardless of whether a loss was caused) or may result in coverage never attaching. For example, if the notification clause within an insurance policy is a condition precedent, it means that you need to pay even closer attention to the positive obligations upon you to notify a complaint, circumstance or a claim within a certain time frame and via a particular, stipulated method. Failure to do so, could mean that you forfeit your right to seek indemnification for such claim.
This is a crucial concept to understand. It can be tempting to deal with tricky patient complaint by yourself and only involve insurers at the last minute. However, you run the risk of seriously prejudicing your position and the possibility of having to pay a claim from your own pocket if you do this and fail to adhere to the stipulated time frames. We recommend this is the first point you check after the level of indemnity offered and the size of your excess – if any.
Endorsements
A change to a policy document is referred to as an endorsement. Its goal is to document any modifications to the insurance policy’s initial terms in order to reflect the parties' negotiated agreement. Typically purposes of endorsements are to:
Extend cover
Reduce cover
Exclude cover
Clarify instructions
There are several things to keep in mind when you look at an endorsement to work out its impact upon the overall policy:
How does the endorsement alter the coverage that the policy offers?
Does the endorsement alter any of your obligations under the policy?
Does the endorsement impose any brand-new responsibilities or warranties?
Do any of the policy's time limits change as a result of the endorsement?
Does the meaning of the endorsement change in light of any of the Policy's Definitions – these are the defined terms within the policy, ranging from basic concepts such as ‘the Insured’ to ‘’Successful” (in the context of a claim) for example.
It is important to note that endorsements can be issued during your policy term, at the time of purchase, or at renewal. Premiums may be subject to change as a result of an insurance endorsement.
Exclusions
An exclusion clause in a contract of insurance, unlike other exclusion or exemption clauses in conventional contracts, is typically not intended to exclude, restrict, or limit a party's legal liability. Instead, these clauses precisely outline the limits of the risk that has to be insured by stating what will 'not' be covered by the insurance contract. Exclusion clauses are frequently used as a measure to limit the extent of coverage offered, whereas insuring clauses are usually stated widely for clarity. Common examples of exclusions are:
War
Terrorism
Pollution
Intentional loss
Within the healthcare arena they would include:
Euthanasia or assisted suicide
Practising under the influence of intoxicants or narcotics
Specified diseases -arising directly or indirectly out of any communicable disease that has been transmitted by you to a patient.
Again, it is very important that you have a clear understanding of what is and is not covered, and you should ask your broker to take you through these points. It can be particularly important where, for example, you own a hospital and you have your own individual insurance; your individual policy would not extend to corporate medical malpractice cover unless by specific, careful arrangement.
Runoff
Many health professionals purchase special cover for when they retire or have to cease practice for another reason, whilst healthcare organisations purchase it to cover situations where the organisation is bought, merged or wound up in order to guard themselves from claims relating to care provided before ceasing trade. This is known as runoff cover. It is particularly important in healthcare where:
Statutory limitation periods (the time in which a patient can bring a claim in the Court) are frequently disapplied in favour of the ‘date of knowledge’ when a patient became aware that they had allegedly suffered harm as a result of a healthcare treatment;
Statutory limitation date is 21 for a child that receives allegedly negligent treatment – ie a surgeon could treat a baby but the claim would not need to be brought until the child turned 21. Whilst this rarely happens in practice, it is a key consideration in terms of a matter which could come out of the woodwork years down the line;
There are various other situations including, for example, mental capacity of the patient, which can extend the limitation period.
There are several advantages of runoff:
There is no need to renew the cover annually.
If you have to file a claim or notify a circumstance, your premium won't go up.
Due to the fact that your premium has already been paid for, you won't be impacted by any fluctuations in market prices.
In many cases, this approach is less expensive and more cost-effective (over time) than annual purchases.
You are protected for the length of the runoff from claims which come in once you have ceased practice.
The biggest risk is the fact that there is no assurance the insurer will be in business for the runoff length which is another reason why it is so important that you choose a specialist broker who can guide you towards a highly resilient and reputable insurer.
Notification of complaint / claim clauses
As referred to at the outset of the article in respect of conditions precedent, how and when you notify insurers of a complaint, claim or circumstance connected with clinical care which may give rise to a claim is very important. Usually, you will need to provide your broker or insurers with:
A summary or description of your interactions with the patient; it is most helpful if you can do this in a format that can form the basis of a witness statement further down the line – if required;
The relevant patient’s medical records, whether digital or physical and including scans, test results and x rays;
All letters from the patient, their family or their legal representatives in respect of the complaint or claim, along with attendance notes of any conversations you have had
All responses you have sent to the patient / their family – but hopefully if you have followed the advice in this article you will seek insurer / broker input before responding to a patient complaint
Many insurers become confused over the concept of what might reasonably be expected to be a circumstance which may turn into a claim further down the line.
We advise our clients that this is a very specialist, specific question. However, anything that has the potential to cause harm, or you know has caused harm needs to be notified. A good question to ask yourself is “has there been any error?” We are very happy to look at this question with you on an individual basis if you would like more tailored advice. Likewise, it is key that you and brokers have transparent discussions about your needs in order to fully understand your requirements and your desired type of insurance. Transparency in conversations will often lead to you getting better deals and, over time, a better premium as insurers will look fondly over consistency.
Dispute clause
This clause is inserted into insurance policies in order to dictate the process that would apply were there to be a dispute between you and the insurer. The clause determines various factors including:
The territory and jurisdiction in which the dispute would be heard;
The dispute resolution process in terms of time and appealability,
How a judgement – if obtained – would be converted into payment.
The answers to these questions can have a significant impact on how a dispute plays out and how it is handled, which in turn affects the amount of money spent on such a dispute.
Legal Expenses Cover
This is frequently downplayed but is a very important aspect of cover for healthcare professionals. If you are involved in an inquest, regulatory matter or some other form of disciplinary matter, defence costs can be significant. Moreover, and not widely appreciated, inquest finding can impose payment of the patient’s cots upon a doctor or healthcare organisation. As such, it is not difficult for costs of an inquest to eclipse £100,000; speak to your broker about the level of legal expenses cover that is right for you, as a limit of £100,000 could well be too low.
Conclusion
It is all too tempting to ignore the fine print and buy a policy which you assume covers your needs. The slightest turn of phrase or word can have a significant impact upon the meaning of a clause. As such, it is crucial that you take the time to review key areas. At Practition, we have a specialist healthcare team who focus on educating all of our clients and guiding them through the indemnity journey to ensure that the cover we secure for you fits your risk profile.
If you need to get in touch, please do not hesitate to contact:
Flora McCabe
Head of Advocacy and Risk Management - Senior Vice President
T: +44 (0)20 7933 2516
M: +44 (0)77 7542 9377