Policyholder Services



Before you Sign: A Couple of Things You Should Know When You Enter Into Your First Employment Agreement

Many young ophthalmologists are understandably nervous before signing their first employment agreement with another ophthalmologist or ophthalmic group. It’s natural to wonder not only about the right path for your career, but also how to protect your interests within insurance and employment contracts. Here are a few things to consider.

You should know what you are agreeing to within your employment agreement. Look for clauses that address your responsibilities.

You should look for any clauses that specifically address issues or requirements about your insurance. The agreement may state that you are required to purchase a certain amount of coverage. The most common liability limits are $1 Million/$3 Million, which means your policy provides coverage of $1 Million for any single claim, and $3 Million for all the claims in a given policy year. Your hospital will most likely also require that you carry a certain level of coverage as a condition of employment or yearly credentialing for your surgical privileges. If you are able, or required to, secure your own coverage make sure that your policy complies with your contracts.

Look for clauses that may require you to pay for all or part of an extended reporting for claims filed related to services performed during your employment. This coverage is also referred to as a “tail” policy. Here is a short background of tails:

Why is a tail policy needed? Most malpractice policies are written on a “claims-made” form, which means your coverage will be triggered when a claim is filed, not when your patient’s visit, procedure, or surgery took place. Because a claim could be filed several months or even years after your active coverage ends (i.e. your employment has ended and your coverage ends on your termination date), additional coverage is usually required to continue the reporting time for claims to your carrier after your active coverage term ends. This is called “tail” coverage. Your employer may want to shift the cost of that to you (or have you share in that cost). That is a negotiable term of your employment and should be considered before you sign. Tails can be expensive. In general they are approximately 200 percent (sometimes higher) of your annual premium at the time of cancellation.

Must I always purchase a tail policy? No. A tail policy is not always required when you leave employment unless you and your employer agree to this in advance. For instance, OMIC’s policy is portable and can be taken with you when you change positions or geographical areas. We would simply underwrite your new practice situation, change vital coverage information and re-rate you (if necessary) for your new practice situation. You may have your policy provide continuing coverage for claims filed in the future, even if they were related to services you rendered while an employee of your past practice. This is called “prior acts” or “retroactive” coverage. You either purchase a tail or prior acts coverage, not both.

Your employer may want to require you to purchase a tail, however, so that they can make sure coverage exists for your direct liability during their employment of you. This ensures they are not found vicariously liable to cover a claim against you (your direct liability) because you failed to secure continuing coverage after leaving employment (for claims arising from the time you were employed by them). FYI: Your employer always has vicarious liability for your actions as your employer, however this is secondary to your direct liability for your actions as their employee.

You may want to have a tail provision in your employment agreement because when you terminate employment and begin practice someplace else the cost of your new policy will be significantly higher if it includes the coverage for your past employment period.

Note who is responsible not only for paying the yearly premiums while the policy is active, but also who is required to pay for a tail should employment be terminated. This may be negotiable.

Learn how to spot “hold harmless” clauses and how they may affect you.

There is a growing trend for physician employment contracts to contain language requiring the physician to indemnify a hospital or contract management group for any losses related to the physician’s employment. Such indemnification agreements can often be against a physician’s legal interests. Try to have indemnification clauses removed from the contract, if possible. If the clause cannot be removed, try to replace with a narrow, mutual hold harmless clause in which each party agrees to indemnify the other for losses arising solely from the party’s negligence. You can read more about Hold Harmless Clauses and also refer to Hold Harmless Clauses May Increase Physician’s Liability.

Confused or have additional questions? Call us at (800) 562-6642, ext 654. For more tips about early practice see:

6 Things a Young Ophthalmologist Should Know About Malpractice Insurance

 

 

Please refer to OMIC's Copyright and Disclaimer regarding the contents on this website

Leave a comment



Six reasons OMIC is the best choice for ophthalmologists in America.

Supporting your specialty.

OMIC was founded by members of the American Academy of Ophthalmology nearly a quarter century ago and is the only carrier sponsored and endorsed by AAO. OMIC is also endorsed by 54 other ophthalmic societies. The OMIC partnerships with state and subspecialty societies qualifies their members for an exclusive 10% premium credit. Contact your state society for details.

61864684