Straight talk. Solid answers.
Understanding the ins and outs of medical professional liability insurance can be an overwhelming process. It helps to have a partner who will level with you — someone who will prevent missteps and clear up any misconceptions along the way. It’s time to have a word or two about the finer points of the industry. It’s time for a little straight talk.
There are two types of coverages available in medical professional liability insurance: Claims-made and Occurrence. Your clear understanding of both types of coverage is essential to making a fully informed decision on which type of coverage to buy. Some carriers offer only Claims-made. Others offer both, but may limit access to Occurrence coverage to a few medical specialties. Subject to underwriting approval, both Occurrence and Claims-made coverages are available to all eligible individual insureds through the JUA.
There are several important differences between Claims-made and Occurrence coverage. Key among them are:
a. Timing of claim filings required to trigger coverage, and
b. How the limits work.
An Occurrence policy protects you from any covered incident that “occurs” during the policy period, regardless of when a claim is filed. An occurrence policy will respond to claims that come in – even after the policy has been canceled – so long as the incident occurred during the period in which coverage was in force.
In effect, an Occurrence policy offers permanent coverage for incidents that occur during the policy period.
Occurrence limits “restore” each year so that claims paid for incidents arising from one policy year do not deplete limits available to cover claims from other years. Each year an Occurrence policy is in force represents a separate set of limits. Ten years of coverage under a $1M/$3M Occurrence policy could provide the insured protection for up to $30MM in claims (ten year combined annual aggregate limit).
Claims-made policies provide coverage for claims only when BOTH the alleged incident AND the resulting claim happen during the period the policy is in force. Claims made policies provide coverage so long as the insured continues to pay premiums for the initial policy and any subsequent renewals. Each succeeding year the policy is continuously renewed, the “coverage period” is extended. Once premiums stop the coverage stops. Claims made to the insurance company after the coverage period ends will not be covered, even if the alleged incident occurred while the policy was in force.
A Claims-made policy will cover claims after the coverage period ONLY if the insured purchases extended reporting period or “tail” coverage.
Claims-made limits DO NOT “restore” each year the way Occurrence Coverage limits do. The policy limits in place when the policy is purchased remain the single set of limits available to protect the insured from all claims that could arise from care provided during the years the policy is continuously in force. The insured does not have a separate set of limits for each year the policy is in force.
Because both the incident and the claim have to be filed during the coverage period, the Claims-made insurer has little risk of loss the FIRST year a new policy is in force. That is why the first year premium for Claims-made coverage is lower. Each year the policy continuously renews, the coverage period expands, and the insurance company’s exposure to loss increases. For the first four years a Claims-made policy is in force, the premiums increase incrementally to reflect this increased risk. This process is known as the “Claims-made step factor.”
Usually by the fifth year of Claims-made coverage, the risk of loss levels off and the “step factor” reaches a “mature” Claims-made rate. “Mature” Claims-made rates are typically very close to normal rates for Occurrence Coverage.
Claims-made coverage has replaced Occurrence as the most common type of policy offered by medical professional liability insurance companies. A number of factors are behind this evolution, including the fact that reduced carrier liability under Claims-made can mean slightly lower premiums for insureds. Occurrence coverage, or “permanent” coverage, is increasingly difficult to find.
The important thing to understand is why the Claims-made coverage costs less, whether you are purchasing it from the JUA or any other carrier. Don’t ever assume coverage under a Claims-made or Occurrence policy are the same, even if the limits are identical.
If you are considering a move from Occurrence to Claims-made coverage, be sure to seek professional legal advice to revise your partnership agreements, employment agreements, buy/sell agreements and other corporate contracts to specify who will be responsible for buying tail coverage.
Finally, be sure to appreciate the commitment you are making to stick with a single carrier when considering a switch to Claims-made coverage. In order to keep coverage in force and avoid having to buy “tail” coverage you must renew with the same carrier year after year. If you ever have to leave, whether you choose to, or if the carrier non-renews you because of a claim, you will have to buy “tail” coverage and seek another carrier.
In 1975, there was a medical malpractice crisis in South Carolina. Commercial carriers were leaving the market or pricing coverage beyond the reach of medical providers. In response, the JUA was created by statute to provide high-quality, affordable medical professional liability coverage, and to be a stabilizing factor in the market. JUA policies were designed to achieve these goals, while offering an assurance of coverage availability that the commercial market can’t. One of these design features is a limited ability to assess policy holders in the event claims outpace reserves.
The maximum amount the JUA can assess any insured is limited to the annual premium paid by an insured in the year being assessed. For example, if there was assessment for the 2001 policy year in 2012, only 2001 JUA insureds could be assessed, and their assessment could not be greater than the amount of their 2001 annual premium.
The assessability feature of the JUA policy was designed to help secure its long-term strength and reliability in any market condition, and to provide a stable, permanent carrier upon which all South Carolina medical providers can rely.
The JUA has never had an assessment, and none is being contemplated. Financial performance of the JUA has been on a consistent, positive trajectory for over 10 years.
Some carriers require the policyholder to sign a consent to settle agreement before a claim can be settled. Carriers with this policy provision hold it up as a feature that assures the protection of its policy holder’s interests in the event of a claim. It may be reassuring for some medical providers to know their consent must be obtained in writing before a case can be settled. A consent to settle clause, however, may force the policyholder to make difficult decisions. Withholding consent may trigger important changes in policy limits and/or coverage. Such policy changes could include a reduction in limits available to pay a claim, the carrier’s right to recoup jury awards in excess of the settlement amount, or changes in the way defense expenses are treated.
The JUA does not require written consent from its policy holders to settle a claim. The decision to structure the JUA policy in this manner has a number of advantages for insureds. First, it protects all JUA insureds from the rate pressure that can occur when high-risk cases are forced to trial potentially leading to increased verdicts for the plaintiff. Second, it contributes to the JUA’s ability to keep policy terms and conditions unchanged in the event of a claim. Third, it assures that the experienced legal and defense management experts responsible for protecting our insureds best interests are authorized to do so to the full extent of their professional ability. Fourth, it is one of the coverage features that contributes to the JUA’s ability to assure your coverage will not be dropped simply because you have a claim. With the majority of all claims being resolved without payment, and over 90% of trial cases resulting in defense verdicts, the JUA has proven its commitment to protecting its insureds’ interests.
While it may imply a greater sense of comfort and control to have a consent to settle clause in your policy, it is important to understand exactly what changes will be triggered in your coverage when and if you ever do withhold your consent.
The South Carolina JUA is a fiscally responsible association. For the last ten years, our performance has shown a strong positive trend. This performance is attributable to a number of factors, including operating reforms and excellent claims management.
In recent years, legacy liabilities have been reduced, the overall risk pool has improved and loss experience is down. In turn, rates for JUA professional liability insurance have been lowered.
This is all good news for South Carolina’s medical professionals and their patients.
The insurance market is cyclical by nature. Medical professional liability insurance – in particular – is subject to wide swings in both pricing and availability. In 1975 this volatility led to a “crisis” in South Carolina. Many private insurance carriers abandoned South Carolina medical providers, some went bankrupt and others drastically increased rates. The resulting disruption, if left unchecked, could have had long term negative consequences for both the availability and quality of health care in South Carolina. In recognition of the dangerous implications of highly volatile medical professional liability insurance markets, the South Carolina General Assembly passed legislation which created the independent, not-for-profit JUA. The JUA has served its purpose well for over 35 years, and is widely recognized for price stability, quality of coverage and superior defense record.
Since 1975, we have seen several cycles in which writers of medical malpractice coverage in South Carolina have been aggressive with lower rates and times when they have pulled back on offerings and/or left the market altogether. Some have gone bankrupt. Through these market fluctuations, the JUA (and PCF) have succeeded in establishing themselves as the medical community’s most trusted and reliable provider of medical professional liability insurance.
Some medical professional liability insurance providers may lower their rates or offer temporary discounts in order to attract new customers. Over time, however, these premiums will rise or even jump significantly in a single year. As an organization created to bring stability to the market, our rating goals are focused on stability, sustainability and dependability instead of market share. The JUA will not leave the market and will not drop your coverage if you have a claim. Our rates are filed with the Department of Insurance and audited. They are set for the purpose of delivering consistency, dependability and value over the long term.
We are not “pro-settlement.” If a malpractice claim is filed against you, be assured that we will explore every possible method of achieving a successful outcome, including case dismissal, mediation and trial. Throughout the process, we will maintain consistent, detailed communication with you, and always strive to secure an outcome that is most beneficial to you.
The vast majority of incidents and claims involving JUA insureds are resolved without any payment. Of those that do go to trial, over 90% result in a verdict for the defense. No other carrier has successfully defended more South Carolina medical providers in more jurisdictions with more success than the JUA.
While it’s smart to shop around and compare quotes for medical liability insurance, it’s virtually impossible to make a direct, apples-to-apples comparison of policies between providers on rate quotes alone. Medical professional liability insurance is more than a price driven commodity, it’s a partnership. Responsive personal service, quick processing of claims, aggressive defense, a proven track record, assurance of future coverage, local access and integrity are all important elements of a successful professional liability insurance partnership. Some would argue they are more important than the price, for without them, even the cheapest coverage is of questionable value.
As a not-for-profit association, we are here to help.
If you are entertaining quotes from multiple carriers, feel free to contact the JUA Underwriting team directly for professional, objective assistance in evaluating the different terms, conditions and pricing with which you are being presented.