Caption Corner Part 5 – The 3 G’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 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.
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 this February 2017 issue, we discussed the four E’s of insurance: Endorsements; Exclusions; Effective Date; and Extended Reporting Period.
In Part 4 published in this March 2017 issue, we discussed the four Fs of insurance:
Form, Fraud, First-Party Risk, and First-Named.
In Part 5 published in this April 2017 issue, we discuss the three Gs of insurance:
- General Liability
- Group-Owned Captive
- Guaranty Fund
General liability insurance is typically the “first line” of protection coverage that a practice or business purchases. It is also referred to as commercial liability insurance. It is the most purchased product as measured by premium with over $80 billion in annual premium in the U.S. General liability insurance is virtually a compulsive coverage required by landlords named as additional insureds. Therefore the policy must be comprehensive with specific perils listed. This is critical for the insured to reaffirm in the actual general liability policy contract and on the declarations page.
Be extremely careful when evaluating general liability coverage because the policy language almost never exactly reconciles with the insurance agent’s advertising and representations. Hidden meanings and obscure language leave you unprotected. Most, but not all, general liability insurance policies cover the following perils: Property Damage, Bodily Injury, Personal Injury, Advertising Injury, and Fire Legal Liability. Beware of insurance carriers who say that they offer general liability policy coverage as an endorsement to a malpractice professional liability policy or to a homeowners policy.
We have found that carriers do not cover all general liability perils when added to the malpractice liability policy. They deliberately hide or exclude coverage for certain perils, many of which are quite common. For example, some carriers only cover general liability claims when the actual patient is being treated in the office during the actual delivery of defined profession services to that patient as defined by the policy. In other words, if the patient slips and falls in the insured’s office waiting room, there is no coverage, because no professional services are being delivered at that instant. Or, if a delivery person trips and falls in the office, there is no coverage.
Beware of peril limits in the general liability policy. For example, most insurance carriers exclude coverage for more than one fire claim per policy year, and the claim must not exceed $50,000. The NASW Risk Retention Group’s general liability policy covers all perils up to the policy limits with no exclusions, and it covers an unlimited number of occurrences. Most other general liability policies do not cover claims arising from off-site meetings and sessions, including property theft perils against the insured’s attendees, but the NASW Risk Retention general liability policy covers these occurrences. Only the NASW Risk Retention Group’s general liability policy covers an unlimited number of offices, even across state lines, and all employees of a healthcare agency with no census required because the premium is solely determined by the insured’s agency annual revenue.
This is an alternative risk transfer company that is created under the Liability Risk Retention Act that was passed by Congress in 1981. Because of certain professions, such as doctors, experienced excessive liability premiums from insurance carriers, Congress mandated that individuals, practices, or businesses with similar liability exposure could form Risk Retention Groups and self-insure.
Under the Liability Risk Retention Act, a domiciliary state is responsible for regulating the formation and operation of a Risk Retention Group. For example, the NASW Risk Retention Group is domiciled in Washington D.C. and is regulated by that venue’s insurance regulators. Certain continuous requirements must be met such as adequate financial ratios, capital, and surplus metrics, and approved liability insurance product policies supported by sound actuarial business plans.
The benefit of the NASW Risk Retention Group is that the policyholders actually own it, so the profits can be channeled back to the policyholders in the form of lower premiums compared to what the market can offer and provide many more insurance benefits and comprehensive liability policies. No Wall Street intermediaries or stock investors are involved. The Board of Directors for the Risk Retention Groups is led by social workers so they work in the interest of the profession and have input in the insurance product design and development, underwriting, claims adjudication, and administrative services.
The NASW Risk Retention Group buys reinsurance to further support its ability to pay claims on behalf of its policyholders. This enables the NASW Risk Retention Group to surpass the meager limits under the state guaranty funds which are sorely inadequate to pay even modest claims.
A guaranty fund is a state fund available to pay up to a limit that is typically set by most states at only $300,000, for an insured’s claim and the losses of an insurance company that is liquidated. The guaranty fund is funded by assessments made on all licensed insurance carriers in proportion to the premium that it writes in that state. These funds are non-profit, and statutorily created insurance consumer protection funds created to partially protect insureds in the event that the insurance carrier goes bankrupt. Following the liquidation of the insurance company, the guaranty funds step in to ease the burden on the policyholders and the claimants, but not cure the losses completely. They offer prompt payment settlement and payment of the claim up to a limit, which is typically only $300,000.
This means that if there is no reinsurer behind the bankrupt insurance company, then the insured may not be fully covered for the claim because of the limited funds. The NASW Risk Retention Group bolsters the insured’s protection exponentially. It is backed by the A. M. Best A- rated NASW Insurance Company, and also by Lloyds, London, and SwissRe, which are the two leading reinsurance companies in the world. This combination of protection far exceeds the $300,000 cap that the states’ guaranty funds set, and is sufficient to pay any claim up to the NASW Risk retention Groups Professional Liability policy aggregate $5,000,000 limit no matter what the circumstances.
Published April 2017