Massachusetts state laws and regulations that affect your medical practice
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.
Does Massachusetts mandate professional malpractice liability insurance?
Yes. As a condition of rendering any direct or indirect patient care in the Commonwealth, a licensee must obtain professional malpractice liability insurance as follows:
(a) "Professional Malpractice Liability Insurance" shall include only insurance or self-insurance coverage provided by an entity which provides certification to the Board or the Division of Insurance, by a Member of the Casualty Actuarial Society, that funding of the entity is adequate to provide the required coverage.
(b) The coverage amount shall be at least $100,000.00 per claim, with a minimum annual aggregate of not less than $300,000.00. Coverage may be provided on an individual or shared limit basis.
( c ) No hospital or other health care facility is precluded from requiring greater coverage amounts as a condition of appointment or granting privileges.
(d) These requirements shall not apply to the following categories of licensees:
1. Licensees with no direct or indirect responsibility for patient care in the Commonwealth.
2. Licensees whose patient care in the Commonwealth is limited to professional services rendered at or on behalf of federal, state, county or municipal health care facilities.
3. Licensees holding only limited registrations.
(e) In lieu of obtaining such professional malpractice liability insurance, the licensee may petition the Board for permission to obtain a suitable bond or other indemnity against liability for professional malpractice, in the amounts specified above.
(f) Coverage required by this regulation shall be continued until the expiration of any statute of limitations relevant to the events or occurrences covered. Compliance may be through occurrence coverage or claims-made with appropriate tail coverage.
243 MA ADC 2.07
Copyright Kern Augustine Conroy and Schoppmann, P.C. Used with permission.