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Five Points Your Physician Employment Agreement Should Address Regarding Med Mal Coverage

Jessica Hoehn

Physician employment agreement clauses about complex issues regarding your med mal coverage often are muddled at best, and some even create more questions than they would if they just didn't deal with the important malpractice insurance issues. Confusion and ambiguous wording in contracts creates lawsuits so fully understanding these five points will help immensely:

1. Who will be purchasing what coverage? Most Physician employment agreements at least state if the employer or employed physician will be purchasing coverage. The issues go well beyond that, but most agreements only hit the broad brush basics.

2. Retro coverage or not when joining a new practice? Will retroactive coverage be purchased for the employed doctor's possible previous exposure? If not who will pay for the expensive "tail" coverage? If retroactive coverage is being brought into the new practice who will be paying the difference between the "mature" policy cost and a first year claims-made policy cost? Tail coverage allows a physician to extend coverage after the cancellation of a claims made policy. With tail coverage, if a claim is filed that reflects the period of the expired policy, coverage is provided even though the policy is no longer in effect. An important portion of the employment agreement should address any professional liability insurance coverage that will be required, as well as which party will be responsible for acquiring and paying for the coverage. If the professional liability insurance is a "claims made" policy, then tail coverage needs to be addressed in the agreement as well in case of departure or termination.

3. Liability limits: What limits will be required to be purchased? There are differing opinions on purchasing low or high liability limits so the physician employment agreement needs to address the limits issues, as well as situations in which the employed doctor might want higher limits than most in the group, which brings up if this will be allowed and, if so, who will pay for the increased costs of a higher limits policy.

4. Quality of insurance company: To say the least, not all insurers are created equal and there are vastly different thoughts on the risks versus costs of purchasing coverage from a financially unstable insurer versus an A.M. Best top-rated insurer.

5. Departing physician's tail issues: Will a tail purchase be required or will it be acceptable to purchase continuing coverage, keeping the in-force retroactive coverage date for at least five years after leaving a group? Will the choice between those two depend upon termination with cause or not, and/or termination by which party? Since there is now a stand-alone tail market, what quality of tail insurer is acceptable and how long of a tail must be purchased, since even one-year tails can be bought but do not begin to offer relief for the much longer liability risk window?

The physician employment agreement should outline all of these terms on whether the group or the individual physician is obligated to pay for and purchase these coverages. By clearly stating the expectations and requirements in the employment agreement there should be no question on what is expected surrounding the beginning, duration of, and termination of the employment relationship. But remember, lawyers only write up what parties are agreeing to, so all parties to the employment agreement need to fully educate themselves with a knowledgeable and experienced malpractice insurance expert to prevent unrealized expectations or lots of miscommunications about the key issues, both of which can lead to very costly legal actions, which does no parties other than the lawyers any good. Remember too that a misstep in this area can lead to coverage gaps or coverage issues at a time when you are being sued and want top drawer defense, not more legal issues because of a misworded employment agreement.

Jessica Hoehn is a medical malpractice insurance specialist with Danna-Gracey, an independent insurance agency with a statewide team of specialists dedicated solely to insurance coverage placement for Florida's doctors. To contact Jessica, call (888) 496-0059, or jessica@dannagracey.com.



 
 
 
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