Interacting with patients on a daily basis exposes you, your employees, any independent contractors working for you AND the practice itself to professional liability. And, while it’s pretty well-known that doctors and healthcare providers need to carry malpractice insurance, one of the most common mistakes that we see is forgetting to cover your medical corporation. But for most start-up practices, cost is a major issue and providers need to make sure they get the coverage they need – without breaking the bank.
So, what’s the best way to do this?
Let’s start with a quick refresher course on who exactly needs malpractice insurance in your practice. The answer? All healthcare providers and the practice, itself.
In the event of a malpractice claim, many people can be named, including the “name on the door”. Corporate malpractice coverage is a frequently overlooked item when determining who needs to be insured in your practice. Your business entity has vicarious liability exposure, which means that it is responsible for the actions of anyone working on its behalf – that includes you, your staff, or any independent contractors that you have working for you.
When you obtain malpractice insurance for your business entity, make sure that all legal business names are covered under your malpractice policy. This includes DBAs or any legal entity name that is affiliated with your practice.
If you are an independent contractor and have an LLC, make sure that you get coverage for this entity when you obtain malpractice coverage for yourself.
So, how do you go about getting malpractice insurance for a business entity or corporation?
It’s generally recommended that you secure malpractice insurance from the same company that you use for your own coverage. Carriers prefer to keep risks together, so if they insure you, they need to insure your business – since claims are likely to be affiliated.
When you shop around for your malpractice quotes, make sure your agent is aware that you have a business entity that also needs coverage.
There are generally 2 ways that you can insure a business entity for malpractice coverage:
Sharing your individual policy limits with your practice OR
Getting a separate policy for your practice
Shared Limit Option
If you are a solo provider (meaning the only doctor working at the practice), most malpractice insurance carriers will allow you list your business entity on your insurance policy at no additional charge. This option provides share limits coverage for you and your entity.
If, for example, a patient sues you (Dr. John Smith) and your business (Smith Medical Clinic), and let’s say your policy has a $1,000,000 limit per claim, then you and your business will share this coverage for any claims made against both of you.
Shared limits coverage is an easy, inexpensive way to provide protection for your corporation if you are a solo provider or just starting out in your practice.
Shared limits options may also be available for partnership practices, but once you exceed 2 doctors in the group, generally the shared limit option will no longer be available.
Get a Separate Policy
Once the practice reaches a certain size, you will be required to buy a separate insurance policy for your entity. But having a separate entity policy also affords you some additional coverages that may make it worth setting up sooner rather than later.
If you purchase a separate policy for your business entity, this gives your practice it’s own insurance policy with it’s own set of limits. So, if you (Dr. John Smith) have a $1M/$3M limit policy and you buy a separate policy for Smith Medical Clinic with another $1M/$3M limit, then each of you have your own insurance policy with your own separate limits, in case you’re both named in a claim or suit.
Separate entity coverage also provides a wider range of protection for midlevel providers in a group. Most malpractice insurance carriers allow all classes of allied professionals to be insured under the corporate policy at no additional charge. This is beneficial to doctors, because they are no longer sharing their individual policy limits with their staff; but rather, it provides a separate set of limits to cover the entity and all non-physician staff working under it.
Corporate malpractice insurance costs are minimal. For a single physician practice, the corporate malpractice insurance is generally 10% of their individual premium. So, if you’re a doctor who pays $15,000 / year then the cost for a corporate malpractice insurance policy for you will be around $1,500.
For groups, the corporate cost is around 10% of the top 5 physicians’ premiums combined. So, in this example, let’s say we have a group of 10 doctors and they each pay $10,000 / year for their malpractice insurance. The corporate malpractice insurance cost would be $5,000 ($10,000 x 5 = $50,000 x 10%).
The corporate malpractice insurance policy extends coverage on a shared limits basis and coverage is generally limited to the acts done within the scope of employment. When an allied provider leaves a practice, they typically do not need to purchase tail insurance, since they were sharing the policy with their employer; however, it is the employer’s duty to maintain continuous coverage and take care of the tail insurance at some point in the future (unless it’s an Occurrence policy).
When you’re working with an agent to get quotes for your malpractice coverage, be sure to provide them with a complete roster of staff for your practice, including the named entity and any other DBAs or affiliated businesses. Your agent can then provide you with coverage options and scenarios for both shared limits and separate limit policies so that you can compare costs and find the option that’s right for you.