Choosing a Professional Liability Insurance Carrier: A Guide for Advanced Practice Clinicians

Choosing the right malpractice insurer is one of the most important professional decisions you’ll make. When your reputation and livelihood are on the line, you need a strong, proactive insurance partner on your side.

Why You Need Your Own Coverage

Despite facing many of the same liability and malpractice risks as physicians, advanced practice clinicians (APCs)—including nurse practitioners (NPs), physician assistants (PAs), certified registered nurse anesthetists (CRNAs), certified nurse midwives (CNMs), and nurse midwives (NMs)—are often not as well insured. When APCs are employed, their employers’ coverage may miss key risks, or coverage limits may be too low, because the dollar amounts of malpractice jury awards keep climbing.

Board complaints are a common gap in employers’ coverage. A single board complaint can take several years and tens of thousands of dollars to resolve—and a board complaint places an APC’s license at risk.

Inadequate liability coverage and shared limits are a financial risk. APCs should scrutinize their employment contracts, looking for individual vs. shared limits of liability. For instance, the contract’s stated monetary limits might apply to the APC, to the APC and a partner physician, or to the APC and the employer.

Supplemental, or excess, malpractice insurance is a policy APCs can use to boost and complement employer coverage. When you have your own supplemental coverage and you face a claim, your two insurance carriers coordinate a defense and settlement strategy. Having your own coverage gives you peace of mind, protecting you from licensing board actions, providing your own legal counsel and adequate funds for your defense, and guaranteeing coverage that is focused on your reputation and livelihood, not on the interests of your employer.

What to Look for in a Professional Liability Policy

A liability policy providing adequate coverage for APCs will have these features:

• Adequate limits to cover licensing board complaints, peer reviews, court fees, and coverage for violations of the Health Insurance Portability and Accountability Act (HIPAA).
• A strong defense team committed to protecting you.
• Consent-to-settle guarantee to ensure your case is not settled without your permission.
• Litigation training to help you assist in your own defense.
• Good Samaritan coverage, to protect you when providing emergency medical assistance.
• Flexible coverage options that are portable if you change jobs or practice environments.
• Coverage for wage loss and court costs if you’re named in a lawsuit.
• Representation if you’re subpoenaed to give a deposition in a claim or lawsuit for which you’re not a named party.

As you research insurance carriers, be sure to factor these guidelines into your exploration:

• Weigh the cost of the policy’s premium against the protection, service, financial strength, and long-term stability provided by the carrier.
• Review any potential carrier’s claims defense performance, risk management services, underwriting standards, and actuarial discipline.
• Make sure the carrier you are considering is strong and stable, so you can take comfort knowing they can pay all their claims—including yours.
• Consider the insurance carrier’s mission, knowing that its leadership guides its philosophy. It can, for example, make a difference if a majority of the carrier’s decision makers are healthcare professionals.

What to Ask When Selecting an Insurance Carrier

If a claim is filed against me, how will the insurance carrier defend me? 

Few things in a clinician’s professional life generate more stress and disruption than an allegation of malpractice, so it’s important for you to know what to expect if you’re sued and how to navigate the legal process to ensure success. The litigation process can be long and drawn out, with claims being filed between six months and one year after a negative event or the date of discovery of an injury— depending on state laws.

Effective claims management starts with the prompt review of a claim by an experienced claims specialist. Your insurer will assign a team to defend you, including designated defense counsel. A loss reserve, an estimate of the expected loss cost, is assigned specifically for your case. Your attorney will contact you promptly to discuss the allegations and to provide information about the next steps. Your attorney will be responsible for filing a response to the summons and complaint and will be available throughout the litigation process to answer your questions and provide legal support. It is probable that your defense counsel will ask you to share your clinical expertise periodically throughout the litigation to further counsel’s own understanding of the case.

It's important to understand an insurer’s consent-to-settle process. Choose an insurer that will not settle—decide not to take the case to trial—without your consent.

How do I determine a carrier’s financial strength?

A professional liability insurer must have sufficient financial resources to pay all current and future claims against its policyholders. Consider the following items when evaluating a carrier’s financial strength against its competitors:

• Financial strength ratings from rating companies like AM Best Company and Fitch Ratings. These ratings reflect the rating company’s evaluation of an insurance company’s financial strength and operating performance relative to the norms of the property and casualty insurance industry. The ratings are based on the financial stability of the company and the company’s ability to pay claims, even during times when the company faces a large volume of claims in a short period of time or claims with especially high costs. High ratings provide assurance that the insurer can honor debts and other financial obligations on time.
• Assets are the property and financial resources owned by an insurance company. Admitted assets are those that can be liquidated to raise cash to pay claims. Nonadmitted assets are assets, such as real estate (other than a home office), furniture, and other equipment that are not recognized for solvency purposes by state insurance laws or insurance department regulations. A strong asset amount provides financial strength and stability.
• Surplus is the amount by which a company’s assets exceed its liabilities. A company’s surplus allows it to take on risk and serves as a cushion in the event that the losses from that risk exceed the premiums intended to cover the risk. Stated another way, surplus can be used to make up for deficiencies in loss reserves that were set aside from earned premiums. Surplus thus serves to provide strength and to maintain fiscal integrity in the face of adverse loss experience that was not actuarially anticipated. A healthy surplus indicates a financially stable insurer.

What is the difference between a stock insurance company, a member-owned company, and a risk retention group (RRG) insurance company?

Stock insurance companies are owned by shareholders, and member-owned companies and RRGs are owned by their members (insureds).

Stock insurance companies are publicly traded, and any profits are directed back to shareholders.

A member-owned company is a reciprocal interinsurance exchange or a mutual insurance company, where members pool their resources to insure each other. Members own and control the company, usually governed by a board of governors who are also healthcare professionals. Members vote on company decisions, and profits are returned to members in the form of dividends.

RRGs primarily provide liability coverage for risks that can be difficult or costly to insure through other insurance companies. They are regulated by the federal government but are also required to follow the insurance laws of the state where they are domiciled. RRGs have more flexibility with pricing and underwriting standards compared to other types of insurance companies, provided they comply with rules established by federal law, including the publication of an annual financial statement. Clinicians considering purchasing insurance from an RRG should review the company’s annual financial statement and carefully evaluate to what degree their domiciled state requires them to meet the high standards of solvency and effective management necessary to ensure that the company is able to fulfill its insurance obligations.

What additional tools and resources will the insurer provide me?

Select an insurer that offers the tools and resources you need to help reduce risk and keep your practice safe.

Your coverage should include access to CE or CME, online disclosure resources, and health literacy tools, as well as risk management services and patient safety programs.

An insurer with deep expertise in this area could help you make sustainable improvements to your practice.

Will my professional liability insurance needs be met with the coverage offered?

It’s vital to ensure your coverage provides legal representation for administrative actions brought by Medicare/Medicaid, medical licensing boards, credentialing reviews and actions, professional review organizations, federal agencies regarding EMTALA, and the DEA. You should also ensure coverage for HIPAA violations. This type of coverage is not typically available in a shared limits group policy, one of the biggest reasons APCs need excess coverage beyond what is provided by their employer.

Can I rely on the insurer to be my strategic partner?

Navigating today’s complex healthcare environment requires an insurer that does more than pay claims. A strong, effective business partner will also:

• Provide data that reveals liability trends in your specialty and helps improve safety in your practice environment.
• Successfully support liability reform and vigorously advocate to safeguard access to patient care.
• Provide consultative, customized, and innovative coverage solutions that reduce and control costs and guard against risk.

Does the insurance provider have experience in my practice location?

An insurer with nationwide coverage alongside local expertise will provide the scope and resources to identify emerging risks and respond with innovative solutions for all specialties, while lending unique regional insights. The legal environment can vary widely state-by-state, and even city-by-city.

Choosing an insurer that has an established multistate presence can give you a portable policy that will allow you to be covered wherever you practice.

Types of Coverage

• Primary professional liability coverage is your main liability insurance policy and it can provide you with some financial protection if you’re sued—the amount of coverage you have is determined by the limits you select. Even if you’re insured by your employer, you may want to purchase your own coverage so you can control the terms of your policy. Independent clinicians must have this coverage, but others often select this type of policy to ensure they have protection in addition to their employer’s coverage to protect their own reputation.
• An excess policy comes into play when the primary policy’s coverage limits are exhausted. Think of it as a backup insurance policy. If you’re sued and the costs exceed the limits of your primary policy that was purchased by your employer, the excess policy kicks in to provide additional coverage. Clinicians may choose this option if they are satisfied with the terms of their employer’s policy but would like added peace of mind.
• Vicarious liability insurance is optional coverage you should consider if you own your own practice and have employees, independent contractors, a supervising or collaborating physician, or others acting on your behalf because you could be held responsible for their acts or omissions. This is an endorsement added to your primary liability policy.

Types of Policies

Two types of coverage—claims-made or occurrence policies—largely differ based on when they provide coverage for a claim made against you and how much coverage they provide over the years you have the policy.

Occurrence coverage: This covers you for any incident that occurs (or that did occur) while the policy is, or was, in force, regardless of when the incident becomes a claim.

Benefits of occurrence coverage:

• You’re covered for a claim no matter when it occurred, as long as you had an in-force policy at the time of the claim.
• You don’t need to purchase tail coverage, which can be costly.

In the illustration below, the incident occurs within the policy period so even though it was reported after the period ended or if the policy was cancelled, it’s still covered by the occurrence policy.

Claims-made coverage: A claims-made policy provides coverage for claims arising from incidents that occur and are reported to your insurance company while the policy is in force. This coverage also extends to incidents that happened on or after the policy’s retroactive date. Once a claim is reported within the policy period and meets the policy’s conditions, the insurer assumes responsibility for the ultimate resolution of the claim or lawsuit, provided it falls within the policy’s terms and coverage limits.

Benefit of claims-made coverage:

• Initially, claims-made policies are less expensive than occurrence policies.

In the illustration below, the incident occurs and is reported during the policy period, so it would be covered by the claims-made policy. It would also be eligible for coverage if it was reported during the extended reporting period (tail).

Tail coverage, or the extended reporting period (ERP) coverage protects you against all claims that arise from professional services performed while the claims-made policy was in effect, but were reported after the termination of the policy. Some insurers offer this feature free of charge for retiring clinicians who meet certain requirements.

In this example, the claim is filed after the policy’s retroactive date and before the end of the policy period, so it’s covered. If the clinician had purchased tail coverage and the claim was filed during the extended reporting period, it would also be covered.

Evaluating a Carrier’s Financials

Your evaluation of a professional liability carrier should include a review of its corporate ownership and structure, financial strength and performance, and coverage options. A carrier’s annual report and other financial statements should help you evaluate its net written premium, loss reserves, and surplus so you can determine if the carrier has sufficient financial resources to meet all current and future claims against its policyholders.

Net written premium is the premium retained by an insurance company after it has paid for reinsurance. This is usually shown on the annual report’s statement of income. Since professional liability carriers typically pay out 100 percent or more of premium in the form of losses and expenses, compare net written premium to surplus to make sure the insurer is not over-leveraging itself by writing too much business for its capital base or surplus to support.

Loss reserves are the amount set aside to pay for unpaid claims, both reported and unreported. This is the insurance company’s best estimate of what it will pay for claims, including indemnity payments to injured parties plus all costs associated with litigation. Actual claims costs aren’t known until the claims are paid—sometimes years after loss reserves are set aside. Reserves are key to your financial evaluation of an insurer because they signal whether the company will be able to honor its financial obligation to claimants.

Surplus is the amount by which a company’s assets exceed its liabilities and reflects the insurance company’s working capital. Surplus allows an insurer to grow and cover unanticipated loss costs. Look for an insurer that carries a substantial surplus to assume risk and to pay for unanticipated losses, which helps the company to maintain its strength and fiscal integrity.

Financial and operating strength are indicated by the insurer’s ratings from insurance industry analysts such as AM Best or Fitch Ratings. A company’s rating is an assessment of its ability to pay future claims, but it is also based on its profitability and margins achieved. The higher-rated companies were found to be financially sound and profitable.

Company size is a critical component of financial security that is not directly reflected in these ratings, but it is something you should consider in your analysis. For example, a small insurance company could end up with equal or higher ratings than a large insurance company with hundreds of millions of dollars in surplus because of higher profit margins. Yet, the smaller company may be unable to withstand large-scale losses. So, consider context when you’re interpreting individual ratings.

How Much Insurance Should You Carry?

The dollar amount of liability coverage a clinician should carry depends on many factors, including the clinician’s specialty, the procedures performed, and the type and location of the practice, group, or entity.

Each state follows its own department of insurance regulations and restrictions.

Standard policies will have both per-claim and per-policy (also known as the annual aggregate) coverage limits, and those limit options will vary by state.

Coverage limits vary in states with patient compensation funds (PCFs). PCFs may have minimum insurance requirements and they work with your insurance carrier to provide combined coverage.

Ultimately the exact amount of coverage you choose will depend on your state’s laws, your assets, your comfort level, and the affordability of the coverage. Work with an experienced agent or your personal attorney if you have any questions about the limits that are appropriate for you.

Evaluating a Carrier’s Management Philosophy

You should carefully evaluate a carrier’s management philosophy, which is reflected in its underwriting standards, claims management, risk management, and actuarial policies. A carrier’s approach in these areas influences its pricing policies and the level of service it provides to its policyholders.

Underwriting standards are determined by experienced underwriters who have thorough knowledge of the procedures necessary to properly evaluate clinicians’ applications for coverage. A financially stable carrier declines coverage for unqualified clinicians whose practices might result in indefensible claims.

Claims management starts with the prompt review of a claim by an experienced claims specialist. Select the insurance provider that offers the strongest defense and provides you with individual support to help alleviate the stress and anxiety that accompany a professional liability claim. Policyholders should be vigorously defended against nonmeritorious claims. In instances where there is negligence, the insurance company should attempt to settle quickly and fairly with your consent. Where permitted, a guaranteed consent-to-settle provision should be included in the policy. This requires the carrier to get your written consent in order to settle any claim, so you have control over how claims are settled. An insurance company should also provide its policyholders with a written explanation of how to proceed in the event of a claim and provide support and guidance to a clinician who experiences a claim.

Patient safety and risk management should be an integral part of the service provided by a professional liability insurer. Select an insurer that offers the tools and resources you need to help reduce risk and keep your practice safe. Your coverage should include access to CE, seminars, webinars, and on-demand courses; online disclosure resources and health literacy tools; as well as personalized risk management services and patient safety programs—all provided by qualified, experienced clinical risk managers. Make sure your insurer works to identify potential sources of injury and enhance patient safety, and that it takes a data-driven, collaborative approach to helping you reduce adverse events while increasing patient satisfaction.

Actuarial principles acknowledge probability and statistics, contingencies, loss distribution, risk theory, and forecasting, among other factors. To ensure that premiums are neither insufficient nor excessive, they should be reviewed on an ongoing basis, taking into account the constantly changing nature of the liability environment.

Making the Right Choice

Finding the right professional liability carrier can be time consuming, but it is one of the most important practice decisions you’ll make. Take the opportunity to learn all you can about the quality of the carrier and the people you’ll entrust to watch over your interests.

By thoroughly investigating your options, you can make the right choice in selecting a reputable and financially stable professional liability carrier that meets your insurance needs.

About TDC Group’s Industry-Leading Coverage

TDC Group, through medical professional liability insurance carrier The Doctors Company and its affiliate The Doctors Company Risk Retention Group (RRG), has been protecting APCs since 1976. The Doctors Company has a nationwide membership of over 90,000, including more than 30,000 APCs, and $7.3 billion in assets. Our national perspective and local experts enable us to anticipate emerging threats and deliver relevant solutions—for example, our APC liability policy includes protection against regulatory actions.

Your defense starts with a promise to never settle a claim without your consent.* If you are sued, seasoned advocates will support you throughout the litigation process. And through our national and state advocacy efforts, we defend reforms that are in place, prevent legislation from being enacted that would undermine the defense of clinicians, and take opportunities to enact new measures that would limit liability exposure for our policyholders and clinicians across the country. We lead the industry with a dedicated, award-winning Government Relations team, and we have the only medical liability advocacy program covering all 50 states and the federal level.

Members have access to a wealth of resources, including patient safety self-assessment tools that help clinicians implement effective protocols, resulting in significantly fewer allegations of malpractice. And the industry’s largest claims database gives us an unparalleled understanding of lawsuits against APCs. This data-driven approach enables us to anticipate emerging trends and deliver innovative patient safety tools to help you reduce risk.

In 2007, we created the Tribute® Plan, which rewards healthcare professionals for a career spent practicing good medicine and for loyalty to The Doctors Company with an award at retirement.† We’ve paid more than $175 million in Tribute awards, and the highest award paid to date is $264,808. Eligible members also participate in our generous multiyear dividend program, which has returned more than $470 million in dividends.

*Where permitted by law.

†Policies underwritten by The Doctors Company Risk Retention Group are not eligible for the Tribute Plan or dividends. Tribute Plan projections are not a forecast of future events or a guarantee of future balance amounts. For additional details, see thedoctors.com/tribute.