Malpractice Insurance Coverage; Personal & Group Exposure

If you take a job with a medical group and the employment contract states that the entity will purchase malpractice coverage for you, it sounds like you’re all taken care of, and you don’t need to worry about anything, right?

Not necessarily.

In a recent New Jersey Appellate decision, the court held that a physician-employee was responsible for purchasing her own “tail” coverage on her medical malpractice insurance policy when she terminated her employment — even though the tail coverage would have covered the time when she was working at the job. The employer medical practice had a contractual obligation to “provide and pay the premium for malpractice insurance coverage covering Employee,” but the contract did not specifically address extended reporting period (tail) coverage. Thus, the doctor was not entitled to recover any of the $146,000 she paid for tail coverage.

Group Exposure

While there is substantial risk placed on the employed physician by a poorly worded employment agreement, there may be even greater risk for the medical practice. Notwithstanding the appellate decision discussed above, a medical practice can have significant exposure when a former employee has a gap in malpractice coverage since, under a legal theory known as vicarious liability, an employer is ultimately responsible for the acts of its employees.

So, even if your contract explicitly and unambiguously states that employees are responsible for their own tail coverage, a practice may still be liable for claims that are not covered, if the employee fails to obtain that coverage. Contractual terms between a medical group and a physician-employee generally have no impact on a plaintiff, and ordinarily will not negate vicarious liability. Consequently, good contracts should spell out who is responsible for purchasing a tail, and address the contingencies in case the employed physician or the employing practice breaches that duty.

For example, a contract that requires an employee to purchase her own tail could also give the employer the right to purchase a tail on that physician’s behalf if she fails to do so on her own. A clause to that effect would give the practice the ability to purchase a tail on behalf of the physician, then seek payment from her for the cost of the premium. Another issue can arise when a physician insured on a claims-made policy leaves a group and transfers coverage to a new claims-made policy. The risk in this instance may not present until years later when the physician may cease practice and again have the need to buy a tail. If the tail is not purchased and coverage lapses, any lawsuit brought that involved the timeframe that the physician was employed by the practice would not be covered.

These issues can be avoided if the medical group secures occurrence coverage, which automatically includes a tail. When occurrence coverage is not a viable or practical option though, good employment agreements are essential. As always, practices should retain specialized attorneys to draft employment agreements so that all contingencies are addressed.

Georgia Court Kills Caps on Medical Malpractice While Missouri Court Upholds Caps

By a 7-0 vote, the Supreme Court of Georgia on Monday struck down the state’s caps on pain and suffering damages in medical malpractice cases. “The very existence of the caps, in any amount, is violative of the right to trial by jury,” Chief Justice Carol W. Hunstein wrote in her opinion for the court.

The ruling was the climax of the legal fights over the 2005 tort reform package. Although the court’s response to various aspects of the package had been mixed, the caps, which generally limit non-economic damages to $350,000 in a case against a single medical malpractice defendant, were the most controversial part of Senate Bill 3.  Courtesy of DailyReportOnline.com

Missouri Supreme Court ruling that keeps intact Missouri’s cap on non-economic damages in medical liability lawsuits.  In doing so, the court upheld years of prior decisions which supported tort reform measures.  Although the court held the cap was unconstitutional to plaintiffs whose injuries occurred before the law was enacted, it did not find the reforms including the cap – violated any other section of the Constitution.  

Missouri had been mired in a professional liability insurance crisis when the Missouri General Assembly passed a package of common-sense tort reforms including the cap on non-economic damages in 2005.  Since that time, the liability insurance premiums paid by physicians is approximately 17% less than in states that have no cap.