Importance of Knowing Your Policy Conditions
Did you know that your medical malpractice insurance coverage contains policy conditions that must be met in order to keep the policy in compliance? Not knowing and not following through on these conditions can be detrimental to your coverage, including cancellation. We are telling you this because it happened to one of our clients, even though we strongly recommended he read the medical malpractice insurance coverage, including its policy conditions.
We do not want to see this happen to you. Let’s take a close look at the Conditions Clause from one of our medical malpractice insurance policies:
Policy Conditions – Obligation to Report Material Changes
The FIRST NAMED INSURED shall notify the COMPANY of any changes that might affect the terms of this insurance, including but not limited to any of the following:
1. a change in the location of the practice of any INSURED.
2. if any INSURED or LOCUM TENENS is denied medical staff privileges or has had such privileges restricted, revoked, suspended or reduced by a licensed health care facility.
3. if any INSURED or LOCUM TENENS voluntarily restricts, revokes, suspends or reduces medical staff privileges by a licensed health care facility.
4. if any medical licensing or other governmental agency investigates, restricts, revokes, suspends, places on probation, reduces or otherwise takes any other action with regard to the medical license or DEA authorization of any INSURED or LOCUM TENENS.
5. if any INSURED or LOCUM TENENS voluntarily restricts, revokes, suspends, reduces or otherwise takes any other action with regard to his or her medical license or DEA authorization.
6. if any criminal proceedings are instituted against an INSURED or LOCUM TENENS that are based upon, attributable to or directly or indirectly related to his or her status or conduct as a health care provider.
7. if any INSURED or LOCUM TENENS is ordered or instructed to enter or voluntarily enters a diversionary or rehabilitation program for alcohol, drugs or other substance abuse. Notice must also be provided upon the individual’s departure from such program.
8. if any INSURED intends or seeks to practice in an additional (1) location, (2) health care facility, or (3) area of medicine not designated in the PROFESSIONAL SERVICES endorsement attached to this policy.
9. a change in partners, officers, members or any changes in the structure of operations, ownership or control.
Policy Conditions Not Met – Real Example
One month ago, we received a Cancellation letter on behalf of our client. The insurance company chose to cancel the policy because the insured had not given notice of one of the items that was listed and required to report. Further, the Cancellation provided only 15 days in which to find replacement coverage. Here is the Cancellation Clause taken from this same policy:
Policy Conditions – Cancellation Clause
The COMPANY may cancel this policy more than sixty (60) days after its effective date by mailing or delivering such notice to the FIRST NAMED INSURED at least fifteen (15) days before the effective date of cancellation, provided such cancellation is based upon the following reason:
* An act or omission by any INSURED that substantially increases the hazards insured against, including but not limited to one or more of the material changes identified in Article IX.H.2.-7 (Referring to Obligation to Report Material Changes).
Subsequently, we needed to find replacement coverage in a hurry. In addition to losing the policy, the insured also lost time that he invested in earning a free tail upon his retirement. Now, he will now have to start investing time with his new carrier, which will make him eligible for a free Extended Reporting Period, also known as Tail Coverage, in another five years (v.s. three with the prior carrier).
In conclusion, we recommend you read your policy carefully so that you do not run into issues like the one explained here. We are happy to take the time to review your current policy with you upon request. We welcome you to add your comments. If this article has provided value to you, we ask that you share it.