What should you do when your malpractice insurer won’t renew your policy?
I think it’s safe to say that most highly educated professionals, such as lawyers, doctors, accountants, and engineers, have “Type A” personalities. Most of us are hard-working, driven, perfectionists, who strive to do the best we can for our clients. Yet, we know that “to err is human”, so we prudently purchase our professional liability insurance and pray we never need to report a claim.
Then Bam! We’re hit with a malpractice claim and suddenly our lives are turned upside down. The lawyer becomes the defendant, the doctor is deposed and the accountant is required to explain how a financial matter was mishandled.
The deductible is paid, billable hours are lost, sleepless nights are endured, and finally the claim is settled and paid. Then Bam! We’re walloped again! This time it’s a letter from our faithful friend and defender - the malpractice insurance carrier. Our policy will not be renewed. Yikes! What do we do now? What if we have another claim? How will it be covered? It’s been a tough year, and it just got worse.
Does this scenario sound like you or someone you know? If so, here’s 5 steps you need to take immediately to minimize the damage and protect your assets and reputation.
- Mark your calendar. Take note of the expiration date of your policy. Malpractice insurance policies are “claims-made” policies. If a claim is reported to the carrier after the expiration date of the current policy, (or any applicable extension period), it will not be covered – regardless of when the error occurred. So you need to have new coverage in place before the current policy expires. If you have less than 30 days before the policy expires, ask for an extension to your policy. It may be required by law.
- Request a quote for a tail policy. Contact your current carrier and request a quote for a tail policy, also known as an extended reporting period or extended reporting endorsement. The tail policy will extend the period of time you have to report potential claims to your current carrier. Tail policies are expensive. However, you need to know how much it will cost so you can make a decision later as to whether it’s beneficial to purchase the extended reporting period. You may or may not be able to get prior acts coverage from a new carrier. Even if you do get a quote that includes prior acts coverage, you will want to compare the cost with that of a tail policy.
- Ask for a “loss run report.” Ask your current carrier to send you a copy of your “loss run report”. You won’t be able to get a quote from another company without a loss run report. You will also need the information provided on the loss run report when you are completing the claim supplement on a new application.
- Work with a trusted insurance broker who specializes in malpractice insurance. Now, more than ever, you need to work with a professional insurance broker who specializes in professional liability, knows the market and has access to multiple insurance carriers. Work with one broker you trust and avoid the temptation to shop all over the place looking for quotes. A good broker is going to invest a lot of time in helping you find a new carrier that will provide quality coverage at a competitive premium. If you submit your application to multiple companies, your broker will be “blocked” from obtaining quotes from those companies. If you don’t trust your insurance professional, then find someone you do trust and work with that person.
- Conduct a risk management assessment. There’s no question that your insurance premiums are going to increase – dramatically. It stinks and it may not seem fair. However, you might as well get prepared for this fact, because like repairing a poor credit score, it takes some time to recover from being non-renewed by an insurance carrier after reporting a claim. You will need to have a clear loss history for about five to seven years before standard carriers will offer competitive premiums again. So, this is a good time to undertake a comprehensive risk management assessment of your practice. What steps can you take now that will avoid future claims in the future? The only way to control insurance premiums is to control claims.
Louise Paglen is a NC licensed attorney who provides risk management and insurance services to other professionals. She is the founder and owner of Intelisure Insurance Pro, http://www.intelisure.com, licensed to provide insurance services in NC, SC, VA, GA, and FL. Louise may be reached at firstname.lastname@example.org or (800) 242-7250. To schedule a telephone consultation, click here.