Caption Corner Part 11 – The 3 O’s of Insurance
As licensed practitioners, there is no doubt that you should have a professional liability insurance policy to cover you for malpractice, a cyber or data breach insurance policy to insure you for HIPAA violations arising from a third party information breach, and a general liability insurance policy covering your office, fire perils, bodily injury, and third party property.
This month we will continue to discuss some of the most important liability insurance terms that you need to know: Occurrence, Occurrence Basis, and Original Insurer.
In Part 1 published in December 2016, we discussed the following:
Insurance Agent or Insurance Agency; Hazards and Perils; Limits and Sub-limits; and Insurance Claim.
In Part 2 published in January 2017, we discussed the four D’s of insurance:
Declarations; Deductibles; Direct Writer; and Dynamic Risk.
In Part 3 published in February 2017 issue, we discussed the four E’s of insurance:
Endorsements; Exclusions; Effective Date; and Extended Reporting Period.
In Part 4 published in March 2017 issue, we discussed the four F’s of insurance:
Form, Fraud, First-Party Risk, and First-Named.
In Part 5 published in April 2017 issue, we discussed the three G’s of insurance:
General Liability, Group-Owned Captive, and Guaranty Fund.
In Part 6 published in May 2017 issue, we discussed the three H’s of insurance:
Hazards, Hold Harmless Agreement, and Hard Market.
In Part 7 published in June 2017 issue, we discussed the three I’s of insurance:
Insurable Interest, Insured and Insuring Clause.
In Part 8, published in July 2017 issue, we discussed the three L’s of insurance: Liability – Joint and Several, Limit and Limitation of Risk, and Line of Business.
In Part 9, published in August 2017 issue, we discussed the four M’s of insurance: MGA, Maturity, Monoline, and Mutual Insurer.
In Part 10 published in September 2017, we discussed the three N’s of insurance: Named Insured, Named Peril, and Negligence.
An occurrence is an incident or accident that results in a loss neither expected nor intended from the viewpoint of the insured. To be covered by the insurance policy, the incident or accident that causes the damage and subsequently filed as a claim, must fall within the boundaries of the insurance coverage and take place during the insurance policy coverage period or policy term.
Often times, a call to the HelpLine of the insurance carrier resolves the incident before it escalates into a claim. It is wise to report early and to report often. Insurance carriers typically do not assess, (and the NASW RRG never reassesses), an insured when re-underwriting liability insurance renewal policies for risks from insureds who have called the Help Line for help and information because it shows proactive thinking and responsibility by the insureds.
An occurrence basis refers to liability insurance coverage that is provided, and the act or incident that gives rise to a claim that must occur within the policy period. The important fact to remember is that the claim does not need to be reported during the policy period. In other words, the incident that eventually results in a claim must occur during the policy period, but the claim may be reported and presented at any time after the termination of the policy.
An occurrence liability policy can also be referred to as lifetime coverage. Occurrence basis liability policies have more expensive premiums compared to claims-made basis liability policies, but they provide lifetime coverage. This is because a claims-made liability insurance policy provides coverage for only those claims that occur and are reported, during the policy period; or in the case of any extended reporting period coverage term.
Typically the premium for claims-made liability policies step up over a period of years and require premium payment(s) for extended reporting periods. Some policyholders want to minimize what they spend for insurance coverage during the first several years of their liability insurance policy purchase stream, and buy a claims-made policy.
However, if an insured terminates the claims-made liability policy and buys from another insurance carrier, there may be a gap in coverage if no extended reporting period coverage is purchased. Moreover, extended reporting period coverage is finite, and it is not lifetime coverage. Many healthcare practices and businesses opt for peace of mind and buy occurrence basis liability insurance policies because they are a guaranteed lifetime liability coverage for the period that the policy was in effect, and all subsequent claims arising therefrom with no interruptions in coverage.
The original insurer is the party that issues the insurance policy to the insured. It is a regulated insurance carrier, not a reseller like an insurance agency. The original insurer may also be called the “primary company”, the “direct company”, or the “front company”. Only buy an insurance policy that has an A.M. Best rating of “Excellent”, like the NASW RRG insurance policy.
Do not be tricked by an insurance agent or insurance agency representing itself as the insurance carrier. Insurance agents and insurance agencies are paid commissions by insurance companies for selling an insurance policy to you. Many insurance agents and agencies are simply motivated by commission dollars and do not care about your safety risk and adequate insurance coverage for you. Often times when they try to sell a liability insurance policy to you, they will avoid talking about the pitfalls in the liability insurance policy and weaknesses in the insurance policy they are selling to you. Their goal is to make the sale and to collect their commissions.
It is therefore critical for your own protection, to thoroughly read and understand each page of your liability insurance policy to understand the exclusions and what claims are actually covered. Refer to the many NASW Assurance Services Tip-of-the Month articles and pointers provided when evaluating non-NASW endorsed liability insurance policies. You will learn about the dangers of buying liability insurance policies from insurance agencies.
Published October 2017