Over the years you have seen Ethos advocate for the use of wholesale partners that are true specialists when you need assistance with the placement of a healthcare risk. A true specialist is someone who focuses 100% of their time on their chosen area of expertise. Why is this important when it comes to healthcare professional liability (HPL) placements? Because HPL is perhaps the most dangerous professional liability line of coverage there is. Even small mistakes in the placement of HPL can result in big problems.
Take the proper coverage of independently contracted mid-level providers for example. Nearly all HPL policies require physician providers to be scheduled for coverage to extend. On the other hand, most mid-level staff are automatically extended coverage under an HPL policy – with the typical exception of independently contracted mid-level staff. For some reason, they almost always need to be scheduled for coverage to extend.
As a true specialist in HPL placements I have always been aware of this coverage peculiarity, but it was never clear to me why it existed. I decided to interview a number of HPL underwriters to gain clarity and was surprised to find that their responses varied quite a bit. The following are the 5 reasons I was given for why HPL coverage is typically not automatically extended to independently contracted mid-level staff:
The assumption is independently contracted mid-level staff are typically required to provide their own HPL insurance under the service contract with the insured. To avoid a double coverage situation the definition of “Insured” does not include this kind of staff. Rather, the underwriter relies on the applicant/insured to advise which, if any, independently contracted mid-level staff need to be added to the HPL policy.
Utilization of independently contracted mid-level staff to take advantage of significant business opportunities could allow an insured to dramatically increase HPL exposures in a relatively short period of time, and without the underwriter’s knowledge. On the other hand, ramping up operations with employed staff is much more difficult and takes time.
Independently contracted mid-level staff are thought to have less “skin in the game” than employed mid-level staff, and so are not as highly incented to perform at their best.
Because an insured likely utilizes independently contracted staff for limited periods of time, they may not vet them as thoroughly as they would an employee or provide them with the same level of training. This could negatively impact the quality of the services being provided to patients.
The turnover of independently contracted mid-level staff is likely to be higher than employed staff, which could negatively impact the quality of the services being provided to patients.
All these reasons seem plausible, but based on my numerous discussions it seems clear to me there is no one reason independently contracted mid-level staff are not typically extended HPL coverage automatically. I suspect this standard approach simply evolved over time as carriers sought to mimic the approach of their competitors.
Keep in mind there are a few HPL products out there that do automatically extend coverage to independently contracted mid-level staff because their experience is counter to some of the assumptions listed above. Specifically, their experience indicates it is reasonable to assume an insured will credential, vet and train contracted staff similarly to the way they would an employee. In addition, in at least one case, review of the carrier’s own experience indicated that independently contracted mid-level staff are in fact no riskier than employed mid-level staff. Finally, they believe that an automatic extension of coverage to independently contracted mid-level staff allows them to avoid time consuming and expensive wrongful claim denial allegations that may result in, among other things, distribution and product reputation issues.
The takeaway? For HPL products you place directly, be sure to determine whether or not independently contracted mid-level staff are automatically extended coverage. This is especially important for classes of business that utilize mid-level providers extensively, such as urgent care clinics and medi-spas. And if you want or need the assistance of a wholesaler for the HPL placement, make sure you are working with a true specialist. Otherwise, you could find yourself dealing with a claim denial, a very upset client, and major E&O exposure.
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