Nevada Medical Liability Insurance

A lot has happened since Nevada made national news when the only trauma

center in Las Vegas (University Medical Center [UMC] of Southern Nevada) closed July 3^rd-13^th, 2002 due to general surgeons, trauma surgeons and orthopedic trauma surgeons being unavailable.  Skyrocketing medical liability insurance rates put an abrupt halt to their work at the trauma center.  This was caused by increasing jury awards and an excessive amount of filed malpractice claims.

The Nevada Attorney General issued an opinion allowing the surgeons who resigned to be covered by the state’s sovereign immunity cap as long as they signed new contracts with the UMC Trauma Center.  UMC was then able to enter into 45-day contracts with the surgeons, allowing them to reopen the center while the governor called a special session of the Nevada legislature.

On August 3^rd, 2002 the legislature passed a tort reform bill that included the following provisions:

• The statute of limitations was shortened from 4 to 3 years.
• Non-economic damages for emergency services were capped at $50,000.
• Non-economic damages were generally capped at $350,000 for each defendant, but there were exceptions.
• The medical/dental screening panel was eliminated
• Medical expert witnesses were required to practice in the same field as the defendant case.
• An affidavit was required to be filed for a case to proceed.

Because the reform allowed for exceptions, medical malpractice insurance premiums continued to rise.

Then in 2004, the Keep Our Doctors in Nevada (KODIN) imitative was created in order to create reform similar to what was enacted in California.  The Nevada ballot in 2004 included a question that provided the following:

• $350,000 “Hard Cap” on noneconomic damages per injury with zero exceptions
• Eliminated joint and several liability
• Placed limits on attorney fees
• Permitted either the plaintiff or the defendant to request periodic payments

The question was passed by a 60 percent majority.

Fast Forward to October of 2009

First and foremost medical liability insurance premiums have dropped by 25-45 percent, and because of the reforms, Nevada is no longer seen as one of the “problem states”.    According to the Nevada Department of Insurance there were six major insurers providing professional liability insurance for physicians and surgeons in 2004 – as of October 2008 there are eight authorized carriers.

In addition to the lower malpractice insurance premiums the net gains in Clark County physicians has continued and stabilized.  In 2002 there were just seven new licensees, and in 2003 just the promise of tort reforms brought a net gain of 212 licensees.  It’s interesting how a few simple changes can create such a positive outcome.

You the Physician

While purchasing insurance may not be your favorite pastime and specifically speaking malpractice insurance programs can be very mundane, but real bargains are available to those who use a firm that specializes in professional liability insurance programs.

All malpractice programs are not the same.  In fact, insurance carriers attempt to differentiate themselves with various added features.  Understanding the differences between programs is key, and your insurance broker should be able to explain these differences in simple terms.  Two things to keep in mind when purchasing Nevada malpractice insurance are:

1. Attempt to purchase your policy from carriers with an A- rating or better.  Financial stability is extremely important and you should steer away from insurance carriers that have low ratings or not rated.
2. Attempt to purchase your policy from a brokerage with a track record in the marketplace.  Certain firms have access to multiple carriers and can provide you with a true comparison of the available programs and prices.

Knowing the difference between the backbone of a malpractice policy and the added features is critical to purchasing a program that fits your particular needs.   Every physician specialty has different needs; therefore every medical liability carrier doesn’t work for every physician.  The added features may influence your purchase decision, but

never at expense of the backbone. While the backbone of most malpractice policies should be the same, there is a surprising amount of variation.

You need to be concerned with specific exclusions and limitations which directly affect your professional practices.  The following details some exclusions and limitations you need to be aware of (contact your brokerage for a full list):

• Hours of Practice
• Type of Services Rendered
• Location of Activities
• Limitations on Defense Costs and where the defense costs coverage lies within the policy
• Check to see if your policy has any sub-limits.

When reviewing the policies, “added features” may influence your purchase decision.  The real key is to determine which features actually bring value to you and your practice.  The following details some “added features” you may come across when purchasing malpractice insurance:

• Premise Liability
• Licensing Board Coverage
• Legal Bonds/Lost Income
• Premium Discounts and Premium Credits
• Severability of Limits

Types of Nevada Malpractice Insurance

Claims Made Coverage

In order to simplify things, you really only need to understand three features of claims made coverage:  the “tail”, the “nose” and step rates.

The Tail – by definition, “claims made insurance” means you have to buy coverage for a given policy period.  If you have a claim – you have to meet two tests:

1. The alleged action must occur during the policy period. And
2. The policy must be in-force at the time the claim was filed

Claims made policies include an “escape clause”, so in order to protect you for an extended reporting period a “tail” must be purchased.  A “tail” allows you to stop renewing the claims made policy, and provides for future coverage of claims that occurred during the policy period.  Your insurance broker should be able to explain the difference between the two types of available tails.

The Nose – Is the opposite of the “tail”.  Rather than purchasing a “tail” from your old malpractice carrier, your new carrier will cover you retroactively to the date you started your old claims made policy.  In general “noses” are less expensive than “tails” and depending on your specific situation your insurance broker should compare the differences for you.

Step Rates – “Noses” are nearly always less expensive than tails because of “step rates”.  When purchasing claims made professional liability programs, ask your broker for the step rates for each year – through maturity.  All admitted carriers must file these “step rates” with the department of insurance.  It is imperative that your broker provide you with complete “step rates”.

Occurrence Coverage vs. Claims Made Coverage

An occurrence policy with low value coverage features is not going to properly compare to a claims made policy with an unlimited tail.  When comparing the two, it is extremely important to compare programs on an apple to apples basis.  This rule never changes, the value of the policy is going to depend on the coverage it purchases – in other words – you still only get what you pay for!

A true occurrence product means you are insured for covered actions during that policy period – forever.  You purchase it once, and you are covered forever!  When purchasing and comparing these types of malpractice insurance products, your broker should be able to effectively compare several scenarios so that you can determine which program fits your specific needs.

Shopping for a Group Practice

Is your practice informally or formally organized?  Some informally organized practices may have restrictions built into the coverage because of the potential of “increased risk” of vicarious liability claims.  A formally organized group practice is one that is legally established as a partnership or corporation.  Solo practitioners incorporated as a Professional Association or a Professional Corporation that have no employees are normally treated as an “individual insured”.

Customer Advocacy

In some cases, service seems to get lost in the mix of price vs. coverage vs.

features.  These things are important, but don’t forget to take into account the customer service of the brokerage you are working with.  When discussing options and programs can the firm discuss the key features of the insurance policy and carrier, including the strengths

and weaknesses?  What is their history with the carriers they are representing

you to?  Keep in mind, it is the brokerages job to package you, and your practice and present to the various carriers in the most favorable way.  Does the brokerage have your best interest in mind?  How do your insurance broker’s corporate values compliment yours?

Bottom Line

A solid insurance firm will review your medical malpractice insurance regularly.  They will bring you competitive options and introduce insurance companies new to the Nevada marketplace.  Partner with a specialist in the medical malpractice insurance market who can deliver consistent savings and value to your practice.