FLORIDA - MEDICAL LIABILITY INSURANCE

How much medical liability insurance do I need?

There is no easy answer to the question "How much medical malpractice insurance should a physician maintain?" No amount of insurance can provide complete protection against a catastrophic injury and a runaway jury award. Insurance has become more and more expensive. Therefore, you must perform an analysis based upon your type of practice, your personal assets, your income, your willingness to take risk, and the cost of insurance. The goal is to maximize comfort level and minimize anxiety level, at an affordable price.

What are the considerations?

By contrast, if you are a highly successful practitioner in a high risk specialty with high earnings, and valuable attachable assets, you should consider purchasing as much insurance as you can obtain.

Even with these general guidelines, the equation becomes more complicated by the realities of medical malpractice litigation. Since most cases settle within policy limits, the more insurance you carry, the more the plaintiff will seek to settle a case. A suit with serious injuries that may settle for $1 million, if that is the total available insurance, may be "worth" far more if a $3 million policy is available. This is because plaintiffs' attorneys rarely want to chase personal assets, they are usually only paid on a contingency, and they generally do not want to risk trying a case that can be reasonably settled. Also, since plaintiffs' attorneys are generally negotiating with insurance counsel, the amount being negotiated is usually capped at policy limits with personal assets "off the table."

The corollary of this rule is that the less insurance, the greater the pressure on the physician to settle within policy limits. High policy limits allow you the comfort of seeking vindication by trying a non-meritorious case. Low policy limits, by contrast, could place great pressure on you to settle a case, rather than risk placing personal assets in jeopardy. Since settlements will likely result in higher insurance premiums, and are now often reportable to state licensing boards and subject to publication on their website profiles, settling non-meritorious cases because of insufficient coverage, can be a costly long term decision.

To diminish the possibility of an excess verdict that could result in loss of your personal wealth, you should take affirmative steps to protect your assets. Since asset protection is usually only viable if done before a lawsuit is initiated, any decision to lower insurance limits should be made in conjunction with asset protection. Asset protection can be as simple as transferring major assets such as a home into a spouse's name or as complex as setting up off-shore trusts. Which devices to use depends upon many factors, including your net worth, your plans for those assets, your retirement plans, whether you may need to readily access those assets, and the physical location of the assets.

What is the difference between a Claims Made and an Occurrence Policy?

A "claims made" policy only provides coverage if a claim is made during the policy period. An occurrence policy provides coverage if a claim is made based upon an event that occurred during the policy period. An occurrence policy will not cover acts prior to its effective date (absent retroactive coverage at additional cost) but generally eliminates the need for tail coverage – which could be expensive. Retroactive coverage could also be necessary under certain claims made policies and the value of tail coverage is only as great as the likelihood that your insurer will still be in business after you have retired.

Do I Need Separate Insurance Coverage for my Practice Entity?

In addition to deciding upon the amount of insurance to personally maintain, you should also look at insurance coverage for the practice entity. While some carriers provide coverage for the practice at no additional charge, others charge substantial amounts for that coverage. If your practice has substantial assets - including equipment and accounts receivable, consider insuring the practice. If not, especially if the carrier is charging a substantial amount for the coverage, you may decide to forego the additional cost. Ultimately, your decision should be based upon the entity's ability to manage and reduce its own risk with or without additional insurance.

When you look at coverage for the entity, it is also important to understand what is being covered. Does the policy provide an additional dollar amount of coverage? Does it cover acts by physician members of the practice or only acts of non-professional employees? Does it provide separate defense coverage? An entity policy may be so limited as to make it almost worthless, yet at a substantial price.

Are there any State-specific Requirements?

A. In Florida, as a condition of acquiring and maintaining an active license, and prior to the issuance or renewal of an active license or reactivation of an inactive license for the practice of medicine, a physician must obtain and maintain professional liability coverage in an amount not less than $100,000 per claim, with a minimum annual aggregate of not less than $300,000, from an authorized insurer, from a surplus lines insurer, from a risk retention group, from the Joint Underwriting Association, or through a plan of self-insurance. The required coverage amounts may not be used for litigation costs or attorney's fees for the defense of any medical malpractice claim.

In lieu of obtaining malpractice insurance, a physician may obtain and maintain an unexpired, irrevocable letter of credit which:

1. is in an amount not less than $100,000 per claim, with a minimum aggregate availability of credit of not less than $300,000;

2. is payable to the physician as beneficiary upon presentment of a final judgment indicating liability and awarding damages to be paid by the physician or upon presentment of a settlement agreement signed by all parties to such agreement when such final judgment or settlement is a result of a claim arising out of the rendering of, or the failure to render, medical care and services;

3. is nonassignable and nontransferable; and

4. is issued by any bank or savings association organized and existing under the laws of Florida or any bank or savings association organized under the laws of the United States which has its principal place of business in this state or has a branch office that is authorized under the laws of Floridaor of the United States to receive deposits in Florida.

The letter of credit may not be used for litigation costs or attorney's fees for the defense of any medical malpractice claim.

B. Physicians who perform surgery in an ambulatory surgical center licensed by the State and who have hospital staff privileges must also establish financial responsibility by one of the following methods:

1. Establishing and maintaining an escrow account consisting of cash or assets eligible for deposit in accordance in the per claim amounts specified in Subsection A(1). This escrow amount may not be used for litigation costs or attorney's fees for the defense of any medical malpractice claim.

2. Obtaining and maintaining professional liability coverage in an amount not less than $250,000 per claim, with a minimum annual aggregate of not less than $750,000 from an authorized insurer, from a surplus lines insurer, from a risk retention group, from the Joint Underwriting Association, or through a plan of self-insurance. The required coverage amount may not be used for litigation costs or attorney's fees for the defense of any medical malpractice claim.

3. Obtaining and maintaining an unexpired irrevocable letter of credit, in an amount not less than $250,000 per claim, with a minimum aggregate availability of credit of not less than $750,000 under the same criteria set forth in Subsections A1- 4.

C. The above requirements do not apply to:

1. Any person who practices medicine exclusively as an officer, employee, or agent of the Federal Government or of the State or its agencies or its subdivisions. For the purposes of this subsection C(1), an agent of the state, its agencies, or its subdivisions is a person who is eligible for coverage under any self-insurance or insurance program.

2. Any person whose license has become inactive and who is not practicing medicine in Florida. Any person applying for reactivation of a license must show either that he or she maintained tail insurance coverage which provided liability coverage for incidents that occurred on or after January 1, 1987, or the initial date of licensure in this state, whichever is later, and incidents that occurred before the date on which the license became inactive; or such physician must submit an affidavit stating that such physician has no unsatisfied medical malpractice judgments or settlements at the time of application for reactivation.

3. Any person holding a limited license and practicing under the scope of such limited license.

4. Any person licensed or certified who practices only in conjunction with his or her teaching duties at an accredited medical school or in its main teaching hospitals. Such person may engage in the practice of medicine to the extent that such practice is incidental to and a necessary part of duties in connection with the teaching position in the medical school.

5. Any person who is not practicing medicine in Florida. If such person initiates or resumes any practice of medicine in Florida, he or she must notify the Department of Health of such activity and fulfill the financial responsibility requirements stated above before resuming the practice of medicine in Florida.

6. Any physician who meets all of the following criteria:

i. The physician has held an active license to practice in Florida or another state or some combination thereof for more than 15 years;

ii. The physician has either retired from the practice of medicine or maintains a part-time practice of no more than 1,000 patient contact hours per year;

iii. The physician has had no more than two claims for medical malpractice resulting in an indemnity exceeding $25,000 within the previous 5-year period;

iv. The physician has not been convicted of, or pled guilty or nolo contendere to, any criminal violation or the medical practice act of any other state.

v. The physician has not been subject within the last 10 years of practice to license revocation or suspension for any period of time; probation for a period of 3 years or longer; or a fine of $500 or more for any violation or the medical practice act of another jurisdiction. The regulatory agency's acceptance of a physician's relinquishment of a license, stipulation, consent order, or other settlement, offered in response to or in anticipation of the filing of administrative charges against the physician's license, constitutes action against the physician's license for the purposes of this subparagraph v.

F.S.A. § 458.320

Copyright Kern Augustine Conroy and Schoppmann, P.C. Used with permission.