June 2007

Price becoming less a factor in malpractice insurance decisions

by Timothy J. Feuling

Many doctors of chiropractic make a serious ‑‑ and potentially devastating ‑‑ mistake of thinking that malpractice policies are so similar they can simply look for the most economic choice. While price is definitely a factor to be considered, it is never wise to choose a product based solely on cost.

No doctor would buy the least expensive adjusting table without making sure it was also of good quality. Or, the cheapest note taking system, even if it didn't do billing correctly. And can you imagine choosing office space by finding the lowest rent in town? Of course not! No matter what you buy for your office, you want to look for the best value rather than the lowest price.

As in other purchases, when it comes to malpractice insurance: you need to consider all factors, not just premiums. That's because, to get a reduced premium in any kind of insurance, you have to give up something.

In health insurance, for example, you can lower your premium by increasing your deductible. You pay less each month, but you might be responsible for up to the first $25,000 in medical costs. The same thing is true with auto insurance. If you're willing to take a risk with lower coverage, you can save on premiums. And in life insurance, you can get a real bargain if you don't mind a policy that pays $5,000 and may terminate when you reach age 65!

When it comes to professional liability insurance, just about every chiropractic expert warns that there is a lot more to consider than just the size of the premium.

"The first rule of choosing professional liability insurance is to forget about the price. ... This insurance is protecting your very way of life and means of support, so many other factors are more important," stated James Rooney in an article titled, "Choosing Professional Liability Insurance."

Ed Bates, of Care Providers of Minnesota warned that, "One needs to approach their insurance buying carefully during these times. What may appear to be the best bargain today may indeed cost you more longer term."

And Margaret A. Bogie, insurance consultant for the American Professional Agency, cautioned that, "What looks like a bargain may quickly lose its luster when you read the fine print."

The fine print ‑‑ not the premium ‑‑ is what separates a good policy from a poor one. This fine print can include exclusions that will leave you vulnerable to law suits, or allow the insurance company to settle a case out of court even if you prefer to fight the accusations.

Let's review some of the major factors to look at when determining whether a low‑priced policy is really a "bargain."

Exclusions

Among the most common exclusions are those refusing coverage for such situations as board complaints or sexual harassment lawsuits. Another exclusion that has caused problems for some DCs exempts any lawsuit resulting for "not‑for‑fee" care, that is, free care provided for staff or others. Additional exclusions found in chiropractic malpractice insurance policies include:

*** Infants under the age of 14 days

***  Professional athletes

***  Patients sent to collections or involved in disputes

over fees

***  Pregnant women beyond their first trimester

***  Employees covered under your policy

Each of these exclusions lessens the value of a malpractice insurance policy and can leave you vulnerable to lawsuits. Any policy containing one or more of these exclusions is probably not going to offer full protection and can end up being a costly mistake if purchased merely on the basis of lowered premiums.

Deductibles

Some insurance policies contain a "deductible" amount. Although deductibles were practically unknown in the professional liability market a short time ago, some companies have begun offered lower cost policies with deductibles of $5,000 or more. While there is nothing intrinsically wrong with a policy that has a deductible, it can quickly erase any savings you enjoyed on the premiums, and end up costing you much more in the long run.

Quality of defense

Your insurance company is supposed to provide the best possible defense for you if you end up in court. Yet, that isn't always the case.

In order to save themselves money, many insurance companies skimp on the defense they provide. Since attorney fees account for a large portion of defense costs, the first cost‑cutting step for many insurance companies is there.

"Some have frozen the hourly rates they pay lawyers, and forced defense attorneys to accept more control over expenses. For instance, some insurers are now limiting or requiring prior approval for payments to medical experts, travel expenses, and even copying costs for medical records and depositions," explained author Berkeley Rice in a Medical Economics article.

Rice went on to warn that "stable premiums are no bargain if rising legal costs mean you could end up with a weaker defense or be pushed into a settlement you don't want. And that's exactly what's happening, according to malpractice defense attorneys. As one of them puts it, 'it's a dirty little secret in the industry, and doctors don't know anything about it.'"

Consent to Settle clause

Unless a policy specifically contains a "Consent to Settle" clause, the insurance company ‑‑ NOT the doctor ‑‑ makes the decision whether to fight the charges in court.

According to some experts, many insurance companies are electing to reduce their costs by refusing to defend doctors even when they are completely innocent. "Rupp's Insurance & Risk Management Glossary" includes the statement: "Since a settlement can affect the reputation and earning ability of the insured, this type of clause is an important consideration in selecting a policy."

Hammer clause

A hammer clause is a provision included in some consent‑to‑settle clauses that tries to coerce you into accepting a settlement offer. With a hammer clause, if you refuse the settlement offer recommend by the insurer, the insurer's liability is limited to the amount of the recommended settlement offer.

For example: if your insurance company wants to settle a claim out of court for $50,000 but you want to clear your good name by fighting the claim, the insurer will pay a maximum of $50,000 if you lose the case. If the plaintiff is awarded $100,000, you would have to pay $50,000 plus any deductible ‑‑ even if the policy is supposed to have $1 million coverage. This clause is often referred to as a "blackmail provision" ‑‑ except by those companies offering it as part of their policies!

Attorney Kenneth S. Meyers writes, "Some hammer clauses also eliminate the insurer's liability for defense expenses incurred after the date of refusal, and some even allow the insurer to tender the defense back to the insured at that point. Thus, although the insured might be afforded the right to refuse to consent to a settlement, that right comes with a significant cost attached to it."

Conclusion

Obviously, there are many factors to consider when purchasing malpractice insurance. To focus only on premiums, choosing a "cheap" policy ‑‑ one that could cost you hundreds of thousands of dollars, or even your entire practice ‑‑ based on a savings of a few hundred dollars a year, is the ultimate fool's bargain.

(Timothy J. Feuling is president of Chiropractic Benefit Services (CBS) and assists doctors in maximizing their practices through the proper choice of insurance and related services. Mr. Feuling is also available for speaking engagements at state conventions and other chiropractic events. Doctors may contact him 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).