Physician retroactive dates and the top 5 ghosts of exposures past

[This is the second in a series of commentaries on coverage considerations for non-standard physicians.]

You’ve received the call from the physician you’ve been prospecting and they are finally ready to let you take a shot at placing their medical professional liability insurance.  That’s great news.  They’ve even given you a copy of their expiring declarations page with their application, so you can get a better idea of the basic policy components needed.  On the declarations page you note that they need prior acts coverage.  Not a problem.  But is there more to that retroactive date than meets the eye?

When placing claims-made medical malpractice coverage for non-standard physicians there are numerous risks you need to be wary of, with regard to a retroactive or prior acts date.  Placing coverage with a different carrier or taking over on an existing piece of business with prior acts can create potential gaps in coverage specific to the retro date.  There are countless scenarios, but here we highlight the top 5 categories of potential exposure “ghosts” to look out for.

1. Did they change their practice specialty within the prior acts period?

 Specialty changes within the prior acts period is probably the most obvious concern when placing coverage with prior acts exposure, yet it is still often overlooked.  Many physicians change their specialty focus, but maintain their retroactive date.  They may have a straightforward current practice, but have additional exposures to be considered from prior practice activities.

 I just worked on an example of this with an obstetrics and gynecology practitioner.  Many OB/GYNs have discontinued the OB component of their practice as it tends toward increased claim activity and higher premiums.  As such, it is important to ask a GYN practitioner if they have performed OB procedures in the past, and check to see if that exposure falls within their retro date.  Obstetrics is also a specialty that not all carriers will consider coverage for, so you do not want to discover this exposure after you have bound a policy.  Even if the OB component is not exposed by a claim, you may have to cancel and rewrite the policy in order to prevent a potential uncovered loss.  This cancellation and re-writing of the policy could subject the practitioner and yourself to a potential short-rate penalty and additional stress depending on when in the policy period this exposure is discovered.

2. Did they change their practice location(s) within the prior acts period?

Many physicians work at multiple locations simultaneously and/or move practices as their opportunities change.  Prior acts periods frequently have additional locations exposure.  This is important as underwriters will rate the premium partially based on the practice location.  For example, if a physician has worked in California for the past year, but worked in Nevada for 4 years prior to that, the underwriter may need to take a blended rate approach as the locations may be priced differently.

Certain policies may have a Designated Location Limitation endorsement.  This limits the coverage to claims stemming from the physician’s services at a set location, or locations.  These locations must be scheduled onto the policy in order for coverage to respond.  If you miss a location that falls within the prior acts period, you have the potential for an uncovered claim.  As such, it is important to have a complete list of exposure sites documented.

A number of carriers exclude coverage for specific states and counties.  There are several jurisdictional hot beds across the U.S. that make underwriters uncomfortable.  Many markets are not licensed to do business in every state.  It is important to note the geographic history of the physician to ensure that the prior locations within the retro date would be covered in the event of a claim.

These locations are important to note even if the policy defines the Coverage Territory as the United States of America and/or its territories or possessions, as locations still need to be underwritten and rated for.

3. Did they discontinue any practice procedure(s) within the prior acts period? 

Much like specialty changes, it is important to vet out any procedures that the physician may no longer perform, but still has exposure for.  Certain markets will place exclusionary language in their policy form for procedures that have had adverse outcomes and they will not cover.  Many policies exclude coverage for procedures such as Sargenti root canals, Phentermine use, mesh implants, and non-FDA approved weight loss drugs such as Human Chorionic Gonadotropin (HCG).

Many of these treatments were once considered acceptable, so it is not uncommon to have these past exposures.

4. Did they have any ancillary personnel depart within the prior acts period?

Policy forms vary by company with regard to which types of ancillaries are automatically covered under the policy verbiage.  Some policies include automatic coverage for nurse practitioners, nurse midwives, surgical technicians, etc. if they are employed by, and acting on behalf of the physician within the scope of their duties.  Other policy forms require that these individuals be scheduled onto the policy for coverage to extend.  This derivation can become a problem, primarily when moving coverage to another carrier, as the prior acts exposure including these unscheduled ancillaries may be overlooked.

For example, if an ancillary has left a physician’s employ, but was automatically provided coverage under the policy verbiage for their time with physician, this coverage could be unintentionally dropped by moving to another company.  This creates a gap in coverage should a claim arise prospectively naming that prior ancillary.  The underwriter at the new company would likely be reluctant to extend coverage for the ancillary in the claim, as they were not aware of the prior exposure, and therefore did not rate the premium accordingly.

5. Did they have any additional entities covered under the policy within the prior acts period?

Many medical providers, especially physicians, have individual entities set up for their practice.  The majority of these are Inc.’s or LLC’s that use the doctor’s name (e.g. John Doe, MD, Inc.).  Providers may also set up entities or DBAs that they use for their practice name (e.g. Dr. Doe’s Pediatrics).  Whatever the case may be, these entities need to be accounted for.  As physicians change their practice profiles they may stop using prior entities, but the potential for a claim naming them does not cease.

Underwriters need to be aware of the potential for a claim naming a prior entity in order to extend coverage.  Most of the time entity inclusion does not result in an additional charge and some markets even provide the coverage automatically depending on the circumstance.

Given the above exposures when dealing with prior acts, I suggest the following:

• Get a copy of the full expiring policy if possible.
• Take a look at the definition of ‘Insured’ to see what provider designations are automatically covered.
• Look for any exclusionary verbiage or endorsements limiting coverage for a specific procedure or medication.
• Check for any additional insureds or entities that may be scheduled.

Moreover, ask your client specific questions about their practice history back to the requested retroactive date.

Underwriters need the complete practice profile in order to accurately rate their exposure and assure the entirety of the risk profile has been accounted for.  This can be daunting especially when prospecting a new client, but ultimately means more accurate and thorough quotes.  This leads to two things: a better placed policy and decreased possibility of a denied claim.

Feel free to contact us if you need help with your non-standard physician placements.

[Click to review last month’s related article: 3 Concerns with Dropping Prior Acts Coverage].