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Mistake #1: Not knowing the difference between "Claims-made" vs. "Occurrence" insurance policies.
It is important to understand the difference between the two most common types of professional liability insurance plans - “Claims-made” and “Occurrence”.
Under a “claims-made” policy, the policy covers claims made against you only while the policy is in effect. The down side of this type of policy is that coverage must be continued indefinitely to assure coverage for claims filed in the future for actions that occurred in the past.
Under the “occurrence” policy, you are covered for alleged acts of negligence that occurred while the policy was in effect. It does not matter if the coverage is in effect at the time the claim is made. The benefit of occurrence coverage is that even if you cancel your policy at some future date, you will still have coverage for events that occurred while the policy was in effect.
Mistake #2: Not knowing the financial strength of the insurance company.
Remember from above that the benefit of occurrence coverage is that even if you cancel your policy at some future date, you will still have coverage for events that occurred while the policy was in force? Well, that is truebutand this is a very big butonly if the insurance company is still around to pay your claim. This is an issue of increasing importance. How financially secure is the insurance company issuing this policy? A number of insurance companies have gone out of business in the past few years. What can you do? Go to your local library and get a copy of the Best’s Guide to Insurance Companies. Look up your insurance company and find the financial rating that it has. Don’t accept anything less than a rating of A+.
One other thing to think about is the quality of the legal talent that will be representing you in the event of a claim. With a financially strong company, you are more likely to get the best!
Mistake #3: Not knowing what your coverage limits mean.
You will notice insurance coverage limits written as $1,000,000 each occurrence/$5,000,000 annual aggregate or $1,000,000/$5,000,000. (Also, $1,000,000/$3,000,000, $1,000,000/$1,000,000 etc.) What does this mean? A $1,000,000/$5,000,000 limit means that the most that would be paid on any one claim is $1,000,000 and the number of $1,000,000 claims that could be paid on your behalf in a year is 5, for a total annual aggregate of $5,000,000. So the most the insurance company is going to pay out for claims that occurred in any one policy year is $5,000,000and the most they will pay on any one claim in any one policy year is $1,000,000.
Mistake #4: Not knowing how legal costs are treated.
Legal costs are another area to be aware of. Legal costs can be included within the limits of liability or they can be in addition to the limits of liability. For example: you have a claim against you for damages totaling $1,000,000 and legal expenses are $250,000. You have a policy with limits of $1,000,000/$5,000,000 with legal costs included within the limits of liability. In this case, the legal costs would reduce the $1,000,000 liability coverage available to pay a judgment against you by $250,000 - leaving only $750,000 to pay for the $1,000,000 damages. You would have to come up with the remaining $250,000. So you seeit is important to know how legal costs are treated in the policy you are considering.
Mistake #5: Not knowing what the insurance company requires of you in the event of a claim.
What should you do if you suspect that you have committed a wrongful act which may result in a claim or suit against you? In most cases, in order for your insurance policy to provide you with coverage, you should notify the insurance company as soon as reasonably possible of the problem. Notice should include:
- How, when and where the possible wrongful act took place;
- Names and addresses of any witnesses and injured people;
- Nature and location of any injury or damage.
If you do actually become involved in a claim or lawsuit, for example, you receive a summons and complaint, before coverage is activated, you must notify the insurance company right away. Always follow up an oral notice in writing.
- Immediately record the specifics of the claim and the date you received notice of claim.
- Send the insurance company copies of all demands, suit papers or other legal documents you receive, immediately.
Important! Do not assume any financial obligation or pay any money without the insurance company’s prior consent. If you do, the obligation or agreed payments will be at your own expense!
Mistake #6: Not knowing what “Personal Injury” means.
Some insurance companies will give coverages in addition to the professional liability coverage. Two coverages that you may come across are “Personal Injury” and “Personal Liability”. Let’s take a look at “Personal Injury” first.
“Personal Injury” offense means injury, other than bodily harm, arising out of one or more of the following offenses:
- false arrest, detention or imprisonment.
- malicious prosecution.
- the wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling, or premises that a person occupies, by or on behalf of its owner, landlord or lessor.
- oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; or
- oral or written publication of material that violates a person’s right of privacy.
This may sound a bit technical. Take your time and read it over a few times so at least you have a general idea of what personal injury means. Two important things to be aware of:
- “Personal Injury” coverage is only provided for those offenses that occur solely in the performance of your professional duties as a nurse.
- the offense must take place during the policy period.
Every policy that covers “Personal Injury” will have it’s own definitions and exclusions. The above explanation is meant to give you a general overview. You must get a copy of the policy to know how it is specifically treated.
Mistake #7: Not knowing what “Personal Liability” means.
A risk that you are already exposed to as a homeowner or renter is loss or injury to another as a result of your negligence. "Personal Liability” insurance is meant to take care of such claimswhether they involve bodily injury, property damage or bothup to the “Personal Liability” limits of your policy.
- Injuring a passerby with your umbrella on a crowded bus or elevator.
- Your dog biting the mail carrier’s leg.
- A visitor tripping over a child’s toy.
What is the one thing these examples have in common? They are not work related. Rememberany bodily injury or property damage you might cause in the course of your duties as a nurse are treated by the “Professional Liability” section of your policy “Personal Liability” doesn’t cover nursing-related damages. If you have home or rental insurance, you have personal liability coverage anyway Many nurse professional liability policies include it as an added bonus.
Mistake #8: Not knowing what to do if you are covered by your place of work.
Why should you purchase your own insurance if your place of work covers you? If you think that you are covered through your place of work, there are a few things you should do. The most important is to Get a copy of the policy. This may be easier said than done. However, how do you know what coverage you have unless you inspect the policy yourself? Don’t take someone else’s word that you are coveredGet a copy of the policy!! Once you have the policy, you can apply what you have learned here and determine how good the coverage is.
Some things to look for:
- Is it “Claims-Made” or “Occurrence”?
- Are the limits adequate?
- How are legal costs treated?
- Does the policy provide “Personal Injury”? “Personal Liability”?
- What is the financial strength of the insurance company issuing the policy?
- Is it an admitted Insurance Carrier?
- Is the Facility self-insured? If so, who will defend you in the future if the Facility closes, is sold or merges?
- What are your responsibilities in the event of a wrongful act, claim or suit?
Also, if your lawyer is being paid by and defending your employer’s interestswill your interests also be adequately protected? Be carefulthe insurance may do a better job of protecting your employer than protecting you.
- Do they have to obtain your consent before settling a claim by admitting your negligence?
Even if you determine that your employer is providing you with the proper coverage, any allegations of negligence occurring off-duty can leave you facing the prospect of a lawsuit and the costs of legal defense out-of-pocket. In addition, you could be personally liable for any money judgment rendered in the case and your personal assets could be at risk!
OK, it’s test time! Here are some questions on the material we’ve covered. See how well you do.
- The two most common types of professional liability insurance plans are:
- “Personal Injury” and “Professional Liability”
- Each claim and annual aggregate
- “Claims-Made” and “Occurrence”
- Coverage for claims made against you only while the policy is in force is provided by:
- An “Occurrence” policy
- Annual aggregate policy
- “Claims-Made” policy
- The down side of the “Claims-Made” policy is that the coverage:
- Must have a high liability limit
- Does not cover personal acts of negligence
- Must be continued indefinitely to assure coverage for claims filed in the future for actions that occurred in the past.
- Under which type of policy does it not matter if the coverage is in effect at the time the claim is made?
- “Personal Injury”
- Even if you cancel your policy at some future date, you will still have coverage for events that occurred while the policy was in effect. This is a benefit of which type of policy?
- To find out the financial strength of your insurance company:
- Ask the insurance company
- Ask a friend
- Go to the library and look it up in Best’s Guide to Insurance Companies.
- An insurance company with superior financial status will receive a Best’s rating of:
- $1,000,000/1,000,000 means:
- You are covered for up to $1,000,000 for each claim against you and also for up to $5,000,000 for each claim against you.
- The most the carrier will pay out for any one claim is $1,000,000.
- The most the carrier will pay out for any one claim is $5,000,000.
- The most the insurance company will pay out for losses in any one policy year is $5,000,000.
- B and D
- Legal costs included within the limits of liability:
- Reduce the amount of money available to pay for damages.
- Has no effect on the amount of money available for damages.
- Increase the amount of money available to pay for damages.
- So that legal costs do not reduce the limits of liability available to pay for damages make sure that:
- They are in addition to the Limits of Liability.
- They are within the Limits of Liability.
- They are on an “Occurrence” basis.
- When you suspect that you have committed a wrongful act which may result in a claim or suit against you, what should you do?
- Wait and see if you are sued.
- Notify the insurance company as soon as possible.
- Talk to the injured party and see if they are going to sue you.
- If you do actually become involved in a claim or lawsuit:
- Send the insurance company the original suit papers or other legal documents you receive immediately.
- Send the insurance company copies of the suit papers or other legal documents you receive as soon as possible.
- Send the insurance company a summary of what the legal documents say.
- An example of damages covered by “Personal Injury” coverage is:
- Your dog biting the mail man.
- False arrest, detention or imprisonment.
- A visitor tripping over a child’s toy.
- “Personal Injury” coverage:
- Covers bodily injury or property damage to others as a result of your nursing duties.
- Does not cover nursing related damages.
- Covers libel and slander.
- If you have insurance coverage through your place of work you should:
- Ask a co-worker if they think the coverage is good.
- Accept a verbal confirmation of coverage from administration.
- Obtain a copy of the policy and read it.
- In most cases, coverage through employment:
- Will cover you off-duty also.
- Will not cover you off-duty.
- Will cover you off-duty if someone at work tells you so.
- An example of a “Personal Liability” claim is:
- Someone tripping over a child’s toy in your house or apartment.
- Your dog biting the mailman.
- Accidentally injuring a patient while helping them into the bed.
- A and B
- “Personal Injury” offense means:
- Injury other than bodily injury.
- Bodily injury and property damage.
- Bodily injury only
- If you suspect that you have committed a wrongful act which may result in a claim or suit against youNever:
- Immediately notify the insurance carrier.
- Assume any financial obligation or pay out any money without the insurance company’s prior consent.
- Give the names and addresses of any witnesses and injured people to the insurance company without permission.