March 2005

Malpractice insurance shake up leaves DCs scrambling

All US doctors learning important lessons from situation

by Timothy Feuling, President, Chiropractic Benefit Services

For months, doctors of chiropractic practicing in New York State have been rocked by a serious shakeup in the malpractice industry. In what, in hindsight, appears to be an omen of things to come, two major malpractice carriers in New York ‑‑ HUM (a division of MLMIC) and Princeton ‑‑ were both downgraded to a B‑ rating by AM Best, the leading insurance rating service. Both companies voluntarily withdrew from the AM Best rating procedure to avoid additional downgrades.

Princeton then withdrew entirely from the New York and Pennsylvania markets and, in January 2005, HUM will no longer write or renew chiropractic malpractice insurance policies in New Jersey and New York and the brokerage firm representing HUM began recommending the National Chiropractic Council (NCC) as an alternative insurance provider. But many doctors are questioning that recommendation based on reports that it was given only after the firm made a financial arrangement with NCC to do so.

One of the biggest concerns for doctors is whether to take a chance on an occurrence policy, particularly in these days of uncertainty among insurance companies.

With an occurrence policy, doctors are covered by the company insuring them at the time the incident occurred. If a patient sues for something that happened two years ago, the company of record back then is supposed to provide coverage. But if that company no longer exists or has filed for bankruptcy, the doctor could be left stranded.

The fact that the insurance industry is in the throes of a prolonged shakeup is obvious. Near the close of 2001, insurance expert Charles Kolodkin explained in an article for the International Risk Management Group that the medical malpractice segment of the insurance marketplace was "confused, in disarray, and generally in a state of disorder. Premiums are doubling, hospital deductibles are tripling, claims‑free physicians are being nonrenewed, insurers are leaving territories en masse. Simply put, the market is in chaos."

Numerous medical doctors were badly burned when their insurance companies pulled out of the market. For instance, the St. Paul Companies lured clients with underpriced policies, often insuring high‑risk doctors. In 2002, the company dropped out of the malpractice insurance business, citing losses in excess of $1 billion. According to attorney Bill Bradley, in an article for USA Today, "They (insurance companies) created the problem ... (and then) leave the market and the physicians holding the bag."

Although outstanding claims are supposed to be covered by an industry‑financed guaranty fund, these funds have been exhausted in many states. When Reliance Insurance Company declared bankruptcy in October 2001, it had 187,000 unsettled claims and was insolvent by $1.1billion. According to the Insurance Information Institute, "The rash of insolvencies has depleted the funds of some state guaranty associations. In September 2003, Alaska's guaranty fund had a $5 million shortfall."

One way doctors are protecting themselves is to choose claims‑made policies, which offers numerous benefits over occurrence policies. A full discussion of the differences between claims‑made and occurrence policies is available on the CBS website at www.cbsmalpractice.com. Understanding the way each type of policy works could mean the difference between protecting your practice and assets and facing huge financial losses.

Still, many New York doctors rushing to seek replacement policies are still being lured by 'cheap' policies, often neglecting more important considerations such as safety and coverage.

Again, this is a problem shared with medical doctors. Emily J. Tipping, writing in Physician's News Digest, noted that "Physicians were willing to risk signing up with a less financially stable company like PIC or P.I.E. to get lower premium rates. The price they paid was an insolvent company (and) coverage gaps..."

Gaps in coverage are usually created by policy exclusions often noted in very small print and not mentioned by the insurance sales person.

Next month: Exclusions and provisions ‑‑ why you need to read the fine print.

(Timothy J. Feuling is president of Chiropractic Benefit Services (CBS) and a member of the Board of Directors of the World Chiropractic Alliance. He assists doctors in maximizing their practices through the proper choice of insurance and related services. Doctors may contact him by mail with questions, comments, and requests for insurance quotes at 2950 N. Dobson Rd. Ste. 1, Chandler, AZ 85224, by phone at 800‑883‑ 0412 or by e‑mail: feuling@cbsmalpractice.com).

NOTE: For risk management articles on how to avoid malpractice, sexual allegations and board disputes, sign up for the free CBS Malpractice Report newsletter at www.cbsmalpractice.com. To request the CBS "Malpractice Secrets Revealed" audio cassette containing valuable tips on choosing the right policy for your practice ‑‑ or to request a free rate proposal and policy comparison ‑‑ call 800‑883‑0412.