Hello everyone. Thank you for joining our podcast today. This is Phil Lawson, Vice President of Product Development and Risk. Today we’ll talk about the three N’s of insurance, named insured, named peril, and negligence. But before we do, I must say that you healthcare professionals are to be congratulated for the noble work that you do, and be recognized for the positive difference that you bring to people’s lives every day. You are all healing change agents helping people throughout all walks of life, making life better. There’s no greater cause than your passion and skilled contributions to people. That’s why we have your back here at the Risk Retention Group, that the policyholders own that is ensuring them. We are dedicated to your wellbeing and your protection. Our nation truly values your services now and in the future shown by the following statistics.
You may be interested to know that the U.S. Department of Labor Bureau of Labor Statistics in 2016 forecasted the following to occur for the next decade through 2026. The healthcare field is booming. I look at the fastest growing 30 occupations of all occupations in the nation indicate that eight are in the allied health sector. This sector contains a variety of healthcare and behavioral healthcare workers in related occupations and therapies. These eight occupations account for 4.9 million workers today, and will be over 13 million workers in 10 years. That’s a 32% growth rate over the decade. That’s over four times the average growth rate compared to all occupations in the United States. So you’re working in a truly growing, very important and highly valued field.
So, today we’re going to talk about the three N’s of insurance, named insured, named peril and negligence. As licensed healthcare practitioners, there’s no doubt that you should have a professional liability malpractice insurance policy to cover you, and probably have a cyber or data breach insurance policy to insure you for HIPAA violations arising from third party information breach, and probably a general liability insurance policy covering your office, fire perils, bodily injury, third party property damage. And if you conduct sessions or work off-site out of an office, maybe at a hotel conference facility, you should have a general liability policy in place.
So what’s a named insured? The named insured is the individual or the business that’s named in the insurance policy declarations page. That’s the front page of the policy or a separate page that accompanies it. Typically this individual or entity is responsible for performing the daily functions of the insured such as paying the insurance premium and actually operating the enterprise of the insured.
However, the first named insured is the first name listed on the insurance policy declarations page or also called dec page. This insured acts as a legal agent for all named insureds to initiate cancellation, request policy changes, or accept return premiums. The first named insured may also be responsible for payment of premiums. Oftentimes an additional insured is a person or organization that is added to the insurance policy through endorsement to be covered. Sometimes there’s a premium charge, other times there isn’t.
Oftentimes a landlord is named as an additional insured on a professional liability insurance policy, but be aware. A professional liability insurance policy is focused on covering professional services, which is a defined term in the policy rising from treatment and therapy. It’s therefore not the same coverage as general liability coverage. Do not mistakenly believe that just naming a landlord as an additional insured on a professional liability insurance policy equals coverage. Under a general liability insurance policy it really doesn’t. You will be uninsured for general liability risk in perils in virtually all cases.
What’s a named peril? Well, a named peril is a risk. These are risks that the insurance policy contract actually lists as a peril that is insured under the policy contract. A peril is a cause of loss such as a fire, a theft, or a malpractice peril, which is negligence or sexual misconduct, or information breach, or a client or office visitor slip-and-fall. Maybe a licensing board inquiry or deposition and many others, maybe a subpoena.
Insurance policies list all these named perils as a defined term, which are exactly what are covered by the insurance policy. There are also excluded perils that are listed. This is where a contract language is very important. You must read your policy contract carefully and thoroughly. Some insurance policies are very subjective and unclear. Some also have provisions, they call them proviso clauses, which conditionally reverse or restrict the stated meaning and coverage in the same paragraph.
Typically exclusions and conditions are written into other parts of the policy contact from where a peril is listed as being covered, so a coverage gap can easily exist without the insured knowing. This is why it’s very imperative that you select an insurance provider who you trust, who’s looking out for your best interest, and not a commission-paid insurance agent or agency.
Negligence. This is the third and final element of this podcast, and it’s very important. Negligence is the cause of malpractice. Negligence is the failure to exercise the care that a reasonable or prudent person would under similar circumstances. Negligence includes malpractice and many other liability perils. Malpractice is the most common among practitioners. The elements of negligence include duty, breach, proximate cause and damage. The overall malpractice characteristics include failure to provide the required standard of care commensurate with your particular licensed professional occupation. That’s very important, and that may vary by state, so you want to make sure that you reconcile the state’s definition of your occupation with your policy.
This failure results in damage, injury or death. Any healthcare professional can be sued for malpractice, no matter how trivial the lawsuit complaint appears, and that’s when legal fees are triggered. A patient’s lawyer can define malpractice subjectively. A lawsuit can merely refer to the patient’s perception of wrongdoing without supporting factual evidence. If the patient merely feels anything relating to the scope of treatment or interaction with the healthcare professional provider was carried out incorrectly, or not carried out at all, it’s sufficient grounds to support a lawsuit. Very subjective.
The filing of the required elements of negligence are described in the context of treatment that festers into a malpractice lawsuit. The plaintiff or the patient who brings the lawsuit against you through a lawyer, also called counsel, must prove each element in the lawsuit. In any event, and regardless of culpability, the defendant, that’s you or your insurance carrier who insures you, must pay the legal fees to dispute the charges and defend you until the lawsuit ends, either at trial or through some sort of settlement, or maybe arbitration or some sort of mitigation avenue outside of court.
Duty. This is created when the healthcare professional agrees to accept the patient and establishes a course of treatment with the professional relationship between the two parties. The duty is to create, maintain and deliver professional services within the occupationally defined standard of care commensurate with that specific healthcare professional’s occupation. So there’s a reconciliation that occurs between duty and the standard of care of the occupation that you have to know, and that varies by state.
So duty is the first element.
Then we have breach. This is the healthcare professional’s failure or as often referred to in lawsuits as “dereliction of duty,” to meet the standard of care required by that occupation, and to apply the appropriate diagnostic, preventative and therapeutic measures.
Proximate cause is the next element of negligence, and this specifically links wrongful actions or non-actions arising from the healthcare professional that were directly connected to the outcome or resulting change. The key element is causation, whereby the damage arose directly from the professional’s practice behavior. In other words, but for the action or inaction of the healthcare professional, there would not have been damage.
There is a distinction with the word cause here. Proximate cause is the legal connection of blame whereby the professional has some probability of contributory negligence to the damage arising from the duty breach. This is debatable throughout the lawsuit and is very subjective. Oftentimes when indemnity settlements are reached, a portion of the damage is blamed on the healthcare professional, and damage claims are paid in proportion plus legal fees.
Cause in fact is a stricter measure, and factually links the duty breach committed by the healthcare professional to the patient damage. This is called the smoking gun analogy, where there’s absolutely no doubt of cause and who is responsible for those damages.
Damage is a list of harms to the patient. These include economic or hard damages, and non-economic or soft damages categories. They can be physical, emotional, or financial. The main categories are medical such as lost wages or treatment costs, and even though there are losses including first party and third party costs, the pain and suffering causing social and psychological harm is also damages.
Negligence lawsuits have two expensive components: indemnity and legal fees to defend. They do not have to be practice or therapy related. Damages arising from negligence can be your patient’s stolen property, a calculator, a phone, a handbook, a handbag in your office or in a hotel conference room in which you were conducting a session. Even a fire in your office causing property damage to your landlord, or a slip-and-fall by a visitor to your office, or a dog bite in your office, makes you potentially negligent.
Thank you for listening, and that concludes our podcast for today.