Traditionally, physician practices have been purchasing Professional Liability/Medical Malpractice insurance through Admitted Insurers (e.g. Medical Protective, ProAssurance, TDC, PPIX, and MAG Mutual). Based on your resident state, your practice might be limited to only two or three Admitted Insurers that are able to write your group practice. However, there is another insurance segment referred to as “Surplus Lines Insurers.” Surplus Lines Insurers are capable of serving this very same space but with even greater underwriting flexibility, bringing the available pool of insurers to nearly a dozen markets.
You may be asking what is a Surplus Lines Insurance carrier (refer to an earlier blog “What Is a Surplus Lines Insurer?”). Some buyers might be mistakenly skeptic of this market segment because of a false assumption in believing these carriers are not ideally suited to insure their practice group. I want to debunk the notion that Surplus Lines carriers are the market of last resort for the unfavorable risks. First, Surplus Lines carriers undergo the same scrutiny from financial rating agencies as any Admitted carriers, proving they are financially sound companies. Secondly, many of the Admitted carriers that you may already be familiar with have sister organizations or subsidiary Surplus Lines companies themselves. Thus, making them part of the same parent company structure.
There are, however, several benefits of a Surplus Lines company that I’ve come to know from my experience as a broker and as an underwriter. Here are some examples:
Professional Liability (PL) and General Liability (GL) Combined
Most Surplus Lines carriers can write PL and GL on a single policy. Doing so creates a clean marriage between the two coverage parts. This option isn’t available with an Admitted Professional Liability carrier. Depending on your business, you may want the same carrier to provide both coverage parts. The reason being is that there is sometimes a grey area when it comes to a bodily injury claim. The claim can be submitted under one of two coverage parts – if the injury is as a result of professional services rendered, it is covered by the PL policy. However if the injury is a result of non-professional services, it is then picked up under the GL policy. Confusion arises when there are two different carriers, both having different definitions of what a bodily injury means. You would ideally want for one policy to start where the other leaves off, but this wouldn’t be the case with two companies. By having two different carriers insuring these two coverage parts, you risk either (1) redundant coverage being provided by both carriers, or worse, (2) no coverage provided by either carrier. The last scenario ensuing “finger-pointing” for coverage by the carriers.
For example, some physician practices and clinics offer assistance in helping an individual out of his vehicle and into the waiting room. The admitted PL carrier may not consider this as a professional service, while the GL carrier could have a strict exclusion when it comes to any sort of patient related injuries, and the individual being assisted out of the vehicle would be considered as patient. Here in lies the gap in coverage and neither party willing to pay for that possible fall and hip fracture. The Surplus Lines carrier could provide such coverage, as it would be capable of providing both PL and GL under a single policy.
Broad Definition of “Who Is An Insured”
Admitted carriers generally want every medical professional to be scheduled and named on the policy in order to be afforded with coverage – this puts an onus on the organization to report every change in staff throughout the year. For Surplus Lines companies, while the same is true for physicians, it may not be be true for healthcare professionals. With Surplus Lines companies, many other allied healthcare professionals (e.g. nurses) can be rolled up into the corporate policy limits and be automatically covered under the policy definition of “Who Is An Insured.” This means that nurses, techs, social workers can all be afforded with coverage automatically without you having to inform the carrier each time a new employee starts or one leaves.
In addition to allied healthcare staff being covered, the Medical Director is also provided with coverage for his/her administrative duties. While some Admitted carriers have begun granting coverage for administrative duties, it still is not prevalent across all Admitted carrier policies.
Sexual Abuse Liability Coverage
Admitted Professional Liability companies exclude any sort of bodily injury claims or allegations brought against an individual or entity (vicariously) accusing them of sexual misconduct or abuse. This becomes a very important coverage part, especially with medical practices specializing in the vulnerable pediatric or geriatric population. This coverage varies across carriers, but generally, Surplus Lines carriers can, at the very least, provide defense coverage for the entity in case the corporation is ever brought into a suit for wrongful hire or improper supervision of staff.
Flexibility in Underwriting
Admitted carriers have defined underwriting appetites. This is due to the requirement of having their rates filed with each state permitting them to insure specific types of exposures at predetermined rates (with allowance for some maneuverability of coverage and price). For example, an Admitted carrier in one state may apply a 20% swing debit/credit to a rate to get to desired premium.
In the case of Surplus Lines carriers, their rates are not filed with the state. This gives them complete autonomy to underwrite and price a particular risk at any premium where they feel some underwriting profit can be retained. In some cases, they may be deemed more expensive than an admitted carrier, but in other cases, they can be priced extremely competitively.
The Surplus Lines carrier risk appetite is very broad. If your operation is a traditional Family Practice with a primary location for seeing patients, then an Admitted carrier would be the way to go. However, if you have a Family Practice and your service offerings span at-home visits, rehab services, pharmacy services, then a Surplus Lines carrier might be best suited for your operation.
Once again, every risk is unique and so are the offerings in each state and legal venue. You should always consult with your insurance broker to determine whether a Surplus Lines carrier might be the best fit for your organization.
MPL Risk is a licensed Property & Casualty insurance brokerage firm conducting business in multiple states. We specialize in the healthcare industry and help clients find the right coverage for their business at competitive prices. Visit us at www.MPLRisk.com or contact us at 267-888-4790