Professional Liability: Claims-Made vs. Occurrence By Elizabeth Kincaid, Esq.

The New York Times has reported that 60 percent of the expenditures involved in a malpractice suit are related to court costs and legal fees. With this in mind, it is critical that the insurance company you choose has the resources to provide you with expert legal counsel throughout litigation. A good way to check on this is to assess a company’s financial position.

It’s important to establish that the company you are considering is stable. You should look at its assets, ask to see a copy of its annual report or financial summary, check on complaints or problems through your state insurance department, and find out how long the company has been in business.

Another consideration is whether the company or group from which you may purchase insurance is admitted or licensed as an insurance carrier by your state’s regulatory board. This “admitted or licensed” status is important because it indicates that the company has voluntarily subjected itself to state regulation. The state insurance department reviews rates to make sure the premiums being charged by the insurer are adequate, not excessive, and not unfairly discriminatory.

What should I look for besides rates in malpractice coverage?
First of all, you should be wary of choosing your malpractice coverage based solely on rates. Here’s why: A number of companies enter the malpractice insurance business with the intention of making a lot of money quickly. Unfortunately, these carriers often know very little about the insurance business or the dental profession, and thus may exit the market within a few years. They try to lure dentists with bargain rates. Then, when the claims start to come in, their company may not have adequate surplus or assets to pay settlements, judgments or legal expenses. So the dentist can be left unprotected, with his or her financial future at risk.

Certain other coverage issues are important to consider, such as defense costs outside the limits of liability, consent-to-settle versus reservation-of-rights clauses, and scope-of-practice coverage.

Defense expenses
Defense costs outside the limits of liability are legal expenses incurred by the insurance company to defend suits brought against you. Generally, these expenses are not included in the policy limits, but paid separately. Legal expenses may run into the thousands of dollars – regardless of the limits stated in the policy – for which you may be responsible.

Your rights versus the carrier’s rights
One of the most critical features of many malpractice insurance policies is the reservation-of-rights clause. This gives the carrier the option of settling a claim against you, even if you believe it is not justified. Many insurance carriers adopt this strategy to reduce their overhead because it is often less expensive to settle a claim than to litigate.

However, the emotional cost of settling unfounded claims is borne by the dentist, whose professional reputation may be tarnished in the process.

Look for a carrier, such as NCMIC, that offers a “consent-to-settle” clause (where state regulation allows this provision). With the “consent-to-settle” clause as part of your coverage, no case will be settled unless you and the carrier consent to it. If you feel you have been wrongly accused and want to defend your reputation in court, the carrier will not settle a claim without your authorization. This can help you avoid having a claim settlement appear on your record.

However, some policies with a consent-to-settle clause contain a “hammer” in its policy language. Consent-to-settle clauses with a “hammer” may, in effect, coerce an insured to settle the case when, in fact, the company decides to do so. The language of the policy will read this way: “If the insured refuses to settle the claim and chooses to contest the claim or continue legal proceedings, then the most the insurance company will pay is the amount for which the claim could have been settled plus claims expenses incurred on and after the day the insured refused to settle.”

Finally, watch out for arbitration agreements located within the policy. By signing an arbitration agreement between you and your patient, both of you may be giving up your rights to a jury or court trial. Under an arbitration-agreement provision, any claim by a patient is presented to an arbitrator for review, and you (and the patient) lose the right to decide whether a claim is settled or tried in court. An arbitrated settlement is binding and cannot be appealed.

Scope-of-Practice coverage
Many states have broadened the scope of dental practice as dentists take on added challenges and expand into new areas of professional activity. As you expand your practice, your professional liability insurance will need to provide coverage for these areas as well.

NCMIC has responded to this “growth” environment by creating the NCMIC Dental Group Professional Liability Policy—malpractice coverage for professional services. This cost-effective group malpractice policy covers many activities (if state regulation allows), including sports-team physician coverage, peer review, managed care and more at no additional cost over the base premium. And since the dental plan is a group policy, you can expect premiums that generally cost less than for an individual policy – potentially saving you hundreds of dollars over the life of the policy.

Elizabeth Kincaid is chief operating officer of NCMIC Insurance Company, a subsidiary of NCMIC Group, Inc. NCMIC Insurance Company offers professional liability insurance to health-care providers, among other insurance products and services. Email: ekinkaid@ncmic.com or phone 1-800-769-2000, ext. 342.