Do I Have the Right Insurance For My Healthcare Practice?
There’s a confusing range of insurance products for healthcare practices and practitioners. It’s crucial that your coverages align with your particular needs. We review common risks and the relevant products that address them.
Whether you’re starting a new healthcare practice or are a seasoned practice owner, you have probably asked: “Do I have the right insurance? Am I somehow exposed to risks I didn’t know existed?” Here, we’ll review the insurance products that every healthcare practice should consider.
Insuring the Practice
Your practice likely exists as a separate legal entity. That is, it’s probably an LLC, PLLC, or corporation. Your practice has its own assets (money in the bank, equipment, real estate), so buying insurance helps protect those assets. It also helps protect your patients, staff, or others who might be injured somehow by the practice. Here are a few examples of common insurance policies for practices:
Errors and Omissions Insurance
Errors and Omissions (E&O) policies can be particularly confusing for healthcare providers because insurance brokers sometimes refer to them as “professional liability” policies. (See the discussion below for what “professional liability” means in the healthcare sphere!) E&O insurance covers the business’s professional errors and omissions—as a business. For most practices that offer healthcare services exclusively, this is redundant.
If you provide educational services, consulting, or business coaching services, you may want to discuss E&O coverage with your insurer. Such a policy might cover your erroneous or negligent professional services (e.g., veterinary clinic startup consulting) that fall outside the scope of your licensed services (e.g., the practice of veterinary medicine).
Commercial General Liability Insurance
Commercial general liability (CGL) insurance is a practice’s basic business insurance. It covers things that occur in the day-to-day operations of the practice but are unrelated to patient care. A patient slips on a banana peel in the lobby or an icy patch in your parking lot. Your two-ton laser exceeds the floor’s weight capacity and causes the rafters to buckle, damaging your downstairs neighbor’s ceiling-mounted equipment. You’d call your CGL carrier if something happened to injure someone or damage property that was unrelated to patient care.
Most practices rely upon some kind of email communications, electronic medical records (EMRs/EHRs), or cloud storage today. To protect that data, comply with HIPAA, and guard against ransomware attacks, it’s also important to consider insurance that covers these events.
Insuring the Practitioners & Decision Makers
It’s common for practice owners to conflate the insurance products that cover their practice and the insurance that covers their practitioners. Licensed providers like physicians and physical therapists should obtain insurance that covers their licensed work. This kind of coverage is commonly called malpractice insurance or professional liability insurance.
Professional Liability Insurance (“Malpractice Insurance”)
At its most basic level, malpractice insurance covers the kinds of conduct that would constitute malpractice. For example: operating on a patient’s right arm instead of their left arm would exemplify medical malpractice. If the patient sued the surgeon who performed that surgery, the surgeon would call their malpractice insurance carrier. In contrast, if a patient slips in a puddle of spilled coffee in that same surgeon’s waiting room, the patient’s injury is not medical malpractice. The surgeon wasn’t practicing medicine when the patient fell. Instead, the law considers this “ordinary negligence.” If that patient sued the doctor, the doctor would call their CGL insurance carrier.
Directors & Officers Insurance
Directors and officers (D&O) insurance covers the reasonable conduct of a company’s directors and officers. For healthcare practices, the directors and officers are almost always licensed practitioners. However, malpractice insurance doesn’t cover their actions in their director or officer roles.
Take, for example, a hospital board of directors. The board may decide that women in active labor should report immediately to the labor and delivery floor, rather than the emergency room. The board is multidisciplinary, and financial, logistical, staffing, and medical reasons bolster the change. When implemented, the new policy has unforeseen consequences: three pregnant women, believing they’re to avoid going to the ER, report to the L&D floor with unrelated medical emergencies. The women sue the hospital, including its directors and officers, for implementing the policy. The board members would be covered by their D&O insurance.
Keep in mind, however, that D&O policies won’t shield practice leaders for committing healthcare fraud. Your insurance rarely covers reckless or criminal behavior.
You will need to evaluate whether your insurance policies cover the cost of legal fees if someone sues you, that is, whether it provides “cost of defense” coverage. Under such coverage, the insurance company appoints and pays for an attorney to represent you in the lawsuit. Many healthcare professionals also hire an independent attorney to help evaluate settlement offers or litigation strategies.
Determine whether your insurance will cover the cost of any judgment—that is, any money that the judge or jury orders you to pay at the end of a lawsuit. Even if your insurer covers the cost of defending you in the lawsuit, that doesn’t mean they’ll automatically pay for the cost of a judgment against you. Judgments for personal injuries, property damage, malpractice, and data breaches can quickly run into the millions of dollars.
Legally Mandated Coverage
Depending upon your state and practice, you may also be required to purchase other insurance products. These most often include:
- Unemployment insurance
- Workers compensation insurance
If you’re a concierge provider who visits patients in their homes, frequently travels between offices, or has otherwise less-conventional needs, you might want to consider a few additional types of coverage:
- Car insurance that covers commercial uses
- Homeowners insurance or renters insurance that covers the storage or maintenance of sensitive documents or pricey equipment
Practice owners, don’t forget about all of your personal insurance needs, too:
- Health insurance
- Disability insurance (long-term and short-term policies)
- Life insurance
In this situation, you’ll also want to be sure you have a practice succession plan to establish what will happen to your patients, assets, and team in the event of your incapacity or death.
Does your practice rely upon a cleaning service? Do you have a landlord or management company? Do you rent or own your equipment? It’s vital that all of your vendors have insurance to cover the possible damage that they might do to your property and visitors or staff. If your building management is uninsured and leaves the valet key locker in the parking garage open overnight, and a thief steals your car with patient records in the trunk, you’ll be facing a long list of consequences. But the first thing your attorney will do is check to see if the building is insured and if they can start shifting the blame onto building management!
Ask for copies of your vendors’ insurance certificates, ask for the policies when appropriate, and don’t hesitate to ask an attorney to review their coverage. Also, consider whether the companies renting you equipment or space require you to insure whatever you’re leasing from them.
Understanding Insurance Policy Details
It’s a good idea to ask a healthcare attorney to review insurance policies before you buy them. Why? Attorneys often deal with the aftermath of claims, including when an insurer’s denial of claims comes as a complete shock to the insured. An experienced attorney can confirm that a policy indeed covers what the broker says that it does.
Also, an attorney can advise you about your unique risks and liabilities, and help you establish the proper legal entities, practice policies, etc., to address them. If you would like Jackson LLP’s attorneys to help you manage the risk to your practice in a state where we are licensed, you can schedule a free consultation with us.
This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader and should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.