Medical Malpractice Insurance Definitions

One of the bigger hurdles when selecting a medical malpractice insurance carrier is speaking the language of insurance. At Galen we want you to fully understand your policy, but furthermore we want you to understand the language of the policy that is providing you the peace of mind to practice medicine. We have prepared a list of the commonly used terms and their meanings for you to reference when you have any questions about your policy, the amount and type of coverage that you have, and the legal framework that protects that practice you have worked so hard to build.

When you need further clarification of the terms and definitions below, or have another question we haven’t covered – we’re just a phone call away.

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Admitted Carriers

The most common type of medical professional liability insurers are admitted carriers.  These companies are structured according to state guidelines and are regulated by the state Department of Insurance.  All rates and policies must be approved by the Department of Insurance before an admitted carrier can use them.  These carriers are also backed by a state guarantee fund, which provides an extra layer of coverage in the event that the insurance company becomes insolvent.

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Annual Aggregate Limit

For “claims-made policy”, the annual aggregate limit is the maximum amount the carrier will pay for all claims arising from incidents that occurred and were reported during a given policy year.

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Assessable Company

An obligation of policyholders to pay additional monies in excess of premium amounts to cover past carrier losses for which reserves have proven to be inadequate.

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Claim

A written notice, demand, lawsuit, arbitration proceeding, or screening panel in which a demand is made for money or a bill reduction.

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Claims-Made Policy

The most common type of professional liability coverage available, it provides protection for claims that occur and are reported while the policy is in effect.  (coverage period).  Within the conditions of a claims made policy, a claim must be reported to the carrier in writing by the insured.  Tail Coverage, or a Reporting Endorsement, provides coverage for claims that occur during the coverage period but are reported after the policy terminates. 

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Consent to Settle (*)

A policy provision that requires an insured’s consent before the insurer is allowed to settle a claim. Since a settlement can affect the reputation and earning ability of the insured, this type of clause is an important consideration in selecting a carrier.

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Deductible

A voluntary deductible allows the insured to pay an amount of the “first dollars” of a claim payment and to pay a lower premium for assuming this risk.

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Disability

The inability to continue to perform one’s working or professional career duties due to physical or mental impairment.

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Guarantee Funds

In the case of admitted carriers, the policy will be backed by a state guarantee fund. In the event that the insurance company becomes insolvent, the guarantee fund will cover claims for a period of time as determined by the state.

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Joint and Several Liability

When two or more parties are jointly and severally liable for a tortious act, each party is independently liable for the full extent of the injuries stemming from the tortious act.  Thus, if a plaintiff in a medical malpractice action wins a money judgment against the defendants collectively, the plaintiff may collect the full value of the judgment from any one of the defendants.

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Loss History Letters/Loss Run

Loss history letters show a summary of all claims reported either for all years or the most recent 10-year period. The majority of third party credentialing entities and/or hospitals will only require the “10-year version”.

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Medical Malpractice/Negligence

A breach of a duty owed by a health care provider, which constitutes a deviation from the requisite standard of care thereby resulting in injury/damage to a patient.

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Non-Assessable Company

A condition under which an insurance company is sufficiently sound so that policyholders are not obligated to pay additional money for past losses for which reserves are inadequate.

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Policy

The contract between an insurance company and its insured. The policy defines what the company agrees to cover for what period of time and describes the obligations and responsibilities of the insured.

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Premium

The amount of money a policyholder pays for insurance protection.

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Reinsurance

An agreement between insurance companies under which one accepts all or part of he risk or loss of the other.  Most primary companies insure only part of the risk on any given policy.  The amount varies among carriers.  The remainder of the policy limits is covered by reinsurance entities.  The less primary risk that the company insures the more premium it has to pay to the re insurer to cover the remaining policy limits.

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Retirement

The complete withdrawal by the insured from the practice of medicine. 

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Retroactive (Prior Acts) Coverage.

Under a claims-made policy, this coverage provides insurance for claims arising from incidents that occurred while a previous claims-made policy or policies were in effect, but were not known of and not reported until that policy (or the last in a succession of policies) was terminated. With retroactive coverage, the new policy covers such claims, and purchase of tail coverage from the previous carrier is not required. (See also “Tail Coverage.”)

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Tail Coverage (Extended Reporting Coverage)

Coverage that protects the physicians against all claims arising from professional services performed while the claims-made policy was in effect but reported after termination of the policy. Some insurers offer this feature free of charge for retiring doctors who meet certain requirements.

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Vicarious Liability

Liability for the acts of someone else. 

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