Employee-Related Suits on the Rise

By Kimberly Wittchow, JD
OMIC Insurance and Group Products Associates

[Digest, Fall 1998]

In the litigious business environment of the 1990s, ophthalmic practices of all sizes are increasingly vulnerable to employment practices liability suits. Small and large practices alike are discovering that discrimination, sexual harassment and wrongful termination suits can wreck havoc on their bottom line, as even frivolous or unsubstantiated claims must be defended, often at considerable expense to the practice.

The media is replete with stories of employers being sued even those who insist they “did everything right.” Take, for instance, the female employee who resigned and sued her former employer for sexual harassment in part because one of the company’s owners gave her a scarf on Valentine’s Day. The company claimed it investigated the situation after the employee complained and acted to protect her from further incidents. Nevertheless, a federal court jury awarded the plaintiff $82,000, which the company had to pay, along with its own substantial legal defense costs.

A case in the South arose when an accounting clerk in a medical office threatened to sue, stating that she was having sex with one of the directors. Previously a virgin, the woman claimed that on some occasions sex was consensual, but at other times she was forced to participate. Rather than face a Bible Belt jury, the practice opted to settle for over $35,000.

At one company, three former employees sued, alleging they were fired as a result of age discrimination. The three employees were able to prove that the rating system used by their employer to determine which employees to keep and which to terminate treated older employees unfairly. They won their case and were awarded $8.8 million in damages.

One young female doctor sued when she was not offered partnership after five years at a medical practice. Although she alleged that she had been discriminated against because of her gender and her pregnancy, the senior doctors claimed she was not offered partnership because her work was subpar. When new, potentially incriminating evidence came to light, the partnership settled for $22,500 and paid $5,000 in legal fees.

To make matters worse, damages in an employee suit for sexual harassment often do not end up with the employee’s claim against the offending co-worker. A recent trend has been a rapid rise in the number of counter complaints brought by the offending co-worker against the company for wrongful termination, demotion, defamation and breach of contract as a result of the harassment charges. These claims by supervisory level employees can be more expensive to defend and resolve than the underlying harassment suit.

Who Needs EPLI Coverage?

No ophthalmic practice is immune to lawsuits. Any practice with employees should seriously consider adding Employment Practices Liability Insurance (EPLI) coverage.

EPLI policies typically provide coverage for the health care entity; current and former appointed directors, trustees and officers; and current and former employees, including supervisory and managerial employees. Many carriers offer endorsements that allow other types of employees to be added to the policy. For instance, under the EPLI policy developed by OMIC and the American Academy of Ophthalmology, endorsements can be added to expand the definition of covered insured to include leased employees, independent contractors and leasing companies.

What Does EPLI Cover?

EPLI generally covers wrongful employment practices directed against any employee, former employee or employment applicant arising out of an employment relationship. OMIC offers an endorsement for third party coverage that includes claims brought by non-employees for sexual harassment or discrimination in the workplace. Wrongful employment practices covered by OMIC include:

• Discrimination on the basis of race, religion, age, sex, national origin, disability or any other protected class established pursuant to federal, state or local law.
• Harassment, sexual or other.
• Wrongful termination, including wrongful discipline or evaluation; retaliation; demotion; failure to hire or promote; or breach of employment contract.

In considering which EPLI policy to buy, it is important to evaluate additional coverage features. For example, OMIC’s ELPI policy automatically includes coverage for prior acts. This means that coverage is provided for claims made during the policy period arising from incidents unknown to the company that occurred before the policy effective date. If a practice does not require prior acts coverage, OMIC can exclude it from the policy and discount the premium accordingly. Another important feature of OMIC’s EPLI policy is a duty to defend clause. This requires the carrier to defend against all covered claims regardless of their legitimacy. OMIC includes the duty to defend as a standard coverage feature.

Your EPLI carrier should allow you to select from a broad range of coverage limits. For example, OMIC policy limits range from $50,000 to $2 million per claim and in the aggregate, including defense expenses. Various deductibles are available starting at $5,000.

Risk Management in the Workplace

Two recent U.S. Supreme Court rulings (Ellerth V. Burlington Industries, 118 S. Ct. 2257 [1998] and Faragher v. City of Boca Raton, 118 s. Ct. 2275 [1998]) reminded employers that they can defend themselves against sexual harassment claims when there are adequate and workable procedures in place that invite employees to complain and allow the employer to take appropriate action against the offender.

OMIC, likewise, realizes that prevention is the key to both a discrimination-and-harassment-free work environment and to cost containment in the employment practices litigation arena. In December, OMIC conducted its first nationwide risk management audioconference on employment practices liability. A one hour EPLI program was held at the OMIC booth in New Orleans in conjunction with the Academy’s annual meeting. Additional EPLI-related programs will be held in 1999.

For information on OMIC’s program, please contact the Underwriting Department at (800) 562-6642, extension 639.

Sex in the Workplace – Is Your Practice a Target?

By Ronald P. Goldman, JD
Mr. Goldman is an attorney in San Francisco specializing in medical malpractice and employment-related litigation. This article is adapted from an OMIC-sponsored seminar he presented at the annual meeting of the American Society of Ophthalmic Administrators in April, “Employee-Related Lawsuits: What They Are and How to Prevent Them.”

[Digest, Spring 1999]

An ophthalmologist tells a sexually oriented joke during a staff meeting. Nine of the 10 employees present find the joke funny and are not offended by it. One employee is offended, however, and a few weeks later resigns. Does the offended employee have the right to sue for sexual harassment?

A drug company representative comes into an ophthalmology practice with samples of a new glaucoma medication. While checking in at the front desk, the representative makes a sexually suggestive comment to the receptionist. The receptionist is offended and complains. Is the practice liable for the offensive comments of the drug company representative?

A patient comes in for a vision field test. While the office assistant is instructing the patient on how to take the test, the patient places his hand on the assistant’s leg. Is the ophthalmologist required to discharge the patient from further care?

Sexual harassment is currently one of the hottest areas of litigation involving physicians. Plaintiff attorneys realize that it is more difficult and expensive to sue doctors for medical malpractice than for sexual harassment. In states with tort reform limits on damages, it is no longer as lucrative for attorneys to take on malpractice cases. In the post-Anita Hill/Clarence Thomas/Monica Lewinsky/Bill Clinton era, sexual harassment is in the spotlight. Physicians make good targets for attorneys who specialize in employment-related litigation because they are usually insured or have sufficient assets to sustain a large judgment or settlement. Sexual harassment is less costly to litigate and easier to prove than medical malpractice. Expensive expert witnesses are usually not necessary, and often there are other disgruntled former employees who are more than willing to support the plaintiff’s claims. Furthermore, and most attractive to plaintiff attorneys, is that there are no caps or limitations on pain and suffering damages. Some state statutes allow for an award of attorney’s fees if the employee wins and most significantly, punitive damages may be awarded by the jury based on the defendant’s net worth. In many states, punitive damages are not covered by insurance.

What Constitutes Sexual Harassment?

Although it wasn’t until the 1990s that sexual harassment litigation came of age, it was Title VII of the Civil Rights Act of 1964 that made gender-based discrimination and harassment in the workplace illegal. For the most part, states have enacted laws that parallel the federal law and make it possible to file a sexual harassment claim in state court.

There are two categories of sexual harassment. The first, quid pro quo, is easy to recognize. “Sleep with me, and you’ll get a raise.” “Go out on a date with me, and you’ll get that promotion or you’ll have continued employment here.” Quid pro quo is direct. It says, “This is what I want, and if you give it to me, you will get an employment benefit. If you don’t give me what I want, you’re going to be terminated or discriminated against.”

The second has to do with creating a sexually hostile work environment. This category is harder to define but it’s where we see more litigation. This is where the jokes, the sexually suggestive comments, the verbal expressions and the general office atmosphere come into play. In the case of the ophthalmologist who told the off-color joke, the law says that if you’re creating a sexually hostile work environment that offends even one person, you can be held liable if that person ultimately leaves because of the offensive conduct he or she was subjected to.

Although the majority of sexual harassment claims are brought by females offended by the conduct of males, there is some interesting case law that has come out of female to female and male to male harassment. The Supreme Court has determined that the same laws apply to same sex harassment as to opposite sex harassment; therefore, same sex harassment claims must be addressed in the workplace as well.

 Strict Liability for Employers

One of the unique qualities of sexual harassment and discrimination laws is that strict liability applies to the employer. If the accused is an owner of the practice, a manager, supervisor, shareholder, officer or director, the corporation is strictly liable for all damages assessed against the individual who did the bad act even if the corporation was unaware of what was going on. Strict liability means that the plaintiff does not have to prove that the corporation knew about it or that the corporation participated in it. Strict liability sends a very strong message to employers that this type of conduct has to be prevented.

If you’re in a partnership and one of the partners does the bad act, the entire partnership is liable for all damages even if the other partners didn’t know about it; in other words, all pain and suffering damages, all punitive damages and all loss of earnings that are assessed against the individual bad actor apply to the entire partnership.

Taken one step further, what this means is that not only do you have to be concerned about anyone who has a direct ownership or interest in the practice creating this liability for you, but the employer also has to be responsible for making sure there isn’t sexual harassment between employees, or by vendors, patients or other third parties. Remember the drug company representative? If there’s a complaint from the front office staff, the employer has a duty to warn the representative that if he doesn’t stop making offensive comments to the staff, he won’t be welcome in the office anymore.

The law applies to patients as well. The patient with the wandering hands needs to be told that he will be discharged if he does it again. If that occurs, the doctor should take steps to terminate the physician-patient relationship by sending a letter to the patient explaining that because he did not stop certain improper behavior that he was warned about he is being discharged from the practice. Sometimes there are alternatives to discharging a patient. If it is a particular employee that the patient has been harassing, schedule the patient’s appointments at times when the employee isn’t around the office. But once again, the physician must be prepared to discharge the patient if the situation cannot be rectified in a reasonable manner. The employer’s duty goes that far.

Supreme Court Case Shields Employers

In the last two years, the Supreme Court has set down a new standard that can help employers prevent sexual harassment lawsuits from occurring in the first place and minimize their effects should one occur. In Burlington Industries vs. Ellworth [141 L. Ed 2d 633 (1998)], the Supreme Court stated that an employer could do two things to prevent liability in these kinds of lawsuits.

First, provide all employees with a simple, clearly written policy that says, “We have an office policy against sexual harassment.” Then define what sexual harassment is. A model policy is available from OMIC’s Risk Management Department that talks about what type of things should not be going on in the workplace. Generic model policies also are available from practice managers or state departments of fair housing and employment. Put one together for your practice, post it and give it to every member of the practice (shareholder, partner, etc.) and to every employee in the practice. Make it clear that any form of sexual harassment will not be tolerated in your office.

Second, have a procedure in place whereby employees can complain about violations of the sexual harassment policy, whether it’s an offensive joke, a vendor who comes by and engages in conduct they find offensive, or a patient who says something or touches them in an inappropriate manner. The written policy should basically say that if any employee feels he or she is being harassed in a sexual fashion, he or she should file a confidential complaint with the office manager, office administrator or other designated person in the practice, and that person will conduct an investigation. If the investigation proves there is no merit to the complaint, no action will be taken. If the complaint does have merit, corrective action will be taken. In either case, the employee who files the complaint will be informed of the investigation findings and resulting action.

If an employer follows these two steps and an employee sues without first going through the internal complaint process, the Supreme Court has said that the case will be thrown out. But the employer must show that it had a specific step-by-step procedure in place for filing complaints. Doing so provides a tremendous shield for the employer. No ophthalmic practice is immune to charges of sexual harassment. OMIC offers an Employment Practices Liability Insurance (EPLI) policy for ophthalmologists that covers wrongful employment practices arising from alleged discrimination, harassment and wrongful termination. For information on OMIC’s EPLI policy, please contact Kim Wittchow at (800) 562-6642, ext. 653 or kwittchow@omic.com.

How to Handle a Complaint

An employer should take immediate and appropriate action when he or she knows, or should have known, that sexual harassment has occurred. An employer must take effective action to stop any further harassment and to ameliorate any effects of the harassment.

To those ends, the employer’s policy should include provisions to:

1. Handle the investigation in a confidential manner, respecting the right to confidentiality of all involved.
2. Interview everyone with information on the matter.
3. Make a determination and communicate the results to the complaining party, the alleged harasser and, as appropriate, to all others directly concerned.
4. If sexual harassment is proven, appropriate disciplinary action must be taken against the harasser and communicated to the complainant.
5. Take steps to prevent any further harassment.
6. Maintain a confidential written record describing how the complaint was investigated and resolved.

Resource: State of California Department of Fair Employment and Housing.

Underwriting the Multi-state Practice

By Betsy Kelley, OMIC Underwriting Manager

[Digest, Summer, 2002]

Recently, OMIC has seen an increase in the number of ophthalmologists who routinely practice in more than one state. No longer are such practices limited to satellite offices located in a neighboring border town. Instead, physicians may now have practices hundreds or even thousands of miles apart. While OMIC, as a nationwide carrier, is able to accommodate this growing trend, ophthalmologists who practice in multiple states present unique underwriting exposures. Factors such as licensing, coordination of patient care, and rating issues all must be taken into consideration.

Physician Licensure

While some states may grant exceptions to physicians who limit their interstate practices to consultations, most, if not all, states require any out-of-state physician performing professional services within their boundaries to maintain full and unrestricted licensure in their state. Ideally, the physician also should maintain hospital privileges in each location of practice. If a physician chooses not to maintain hospital privileges in a satellite location due to his or her restriction of services in that location to non-surgical activities, the hospital’s on-call or emergency room requirements, or other reasons, it is essential that the doctor have appropriate arrangements in place with another physician locally to admit patients when needed.

Patient Care

Whether a physician alternates between locations every few days or spends weeks at a time at one location, there will be situations in which a patient requires care during the physician’s absence. To ensure that patients receive prompt medical attention and to reduce the likelihood of claims of abandonment, delayed diagnosis, or delayed treatment, it is essential that the physician establish a protocol for the treatment of such patients. Depending upon the distance between offices, the physician may be available on short notice to care for such patients personally or may need to arrange for a local physician to treat patients in his or her absence. In any event, it is critical that these arrangements be coordinated before the need actually arises and that patients be made aware of the physician’s schedule and of whom to contact for interim care.

When planning the schedule, it is important for the physician to consider the special needs of surgical patients. It is the surgeon’s responsibility to determine whether the patient is an appropriate candidate for surgery and to have an informed consent discussion with the patient prior to surgery. Therefore, the physician should plan to be in each location frequently enough to conduct these preoperative visits within a reasonable period of time prior to the date of surgery. Similarly, the physician should arrange to stay in each location long enough to perform the necessary postoperative care.

Premium Rates

Provided that the physician’s practice protocol falls within OMIC’s underwriting guidelines, the insured’s policy will extend coverage for claims arising from services rendered in either state. The premium that will apply to the policy will depend upon the physician’s practice situation. Some carriers apply the higher-rated territory’s premium regardless of practice volume in that territory while others charge a blended premium based upon the amount of time in each rating territory. OMIC generally rates the policy based upon the premium applicable to the primary location of practice. Provided that the percentage of time spent and the percentage of income generated in the higher-rated territory does not exceed 25% of the physician’s total activities, the premium for the lower-rated territory will apply.

If you have questions about OMIC’s coverage of multi-state practices, please contact an underwriting representative at (800) 562-6642 or by email at underwriting@omic.com.

Updated Guide to Refractive Surgery Requirements

OMIC has updated its Guide to Refractive Surgery Requirements to reflect expansion of coverage to new refractive surgery procedures and to clarify certain underwriting requirements. To obtain a copy of the updated guide, please contact an underwriting representative at (800) 562-6642 or by email at underwriting@omic.com or visit our web site at www.omic.com.

Part-time and Multi-state Practices

By Betsy Kelley, OMIC Underwriting Manager

[Digest, Fall, 2002]

In response to changes in the marketplace, adverse loss development, and concerns about rate adequacy, OMIC has thoroughly reviewed its rating structure and discount plans, including those pertaining to part-time and multi-state practices. Discounts still will be offered to qualified part-time surgeons in recognition of their reduced practice activities; however, stricter guidelines are being imposed to determine eligibility for this discount. Effective immediately for new insureds and upon renewal for existing insureds, physicians must meet the following criteria in order to be eligible for a part-time surgical discount:

-The physician must practice fewer than 20 hours per week.

-The physician must perform fewer than 100 surgeries annually (fewer than 50 if practicing less than 10 hours   per week).

-The physician may not perform any retina surgery, refractive surgery, or cosmetic oculoplastic surgery.

Because of the increased liability exposure and differences in legal climate among states, OMIC determined that changes in its multi-territory rating are also needed. While previously physicians could practice up to 25% in a higher rated territory without it affecting their premium, physicians now will be charged the higher territory if they render services in that territory.

Refractive Surgery

In response to inquiries by current and potential insureds, the Underwriting Committee met in September to review the guidelines for refractive surgery. Because of the possibility that the guidelines with respect to preoperative care could be misinterpreted, the committee modified the guidelines to be more specific with respect to the surgeon’s obligations to the patient. Prior to surgery, the surgeon must perform and document and independent evaluation to determine the patient’s eligibility for surgery. As part of the independent evaluation, the surgeon must personally examine the patient’s eyes and ocular adnexa, perform a slit lamp exam, and carefully review topographies, pupil size, pachymetry, refractive stability, eye health history, and prior records. In addition, the surgeon must carefully analyze the patient’s expectations and, when appropriate, discuss monovision.

The committee also agreed to eliminate the requirement that there be a minimum interval of three months between primary PRK/LASEK/Intralase procedure and reoperation. Enhancements may be performed as soon as the patient’s refraction has been stable (i.e., not more than a one-half diopter change) for at least two months and the residual error is at least 0.75 D.

Intacs for Keratoconus

The committee also adopted underwriting guidelines to review and approve qualified physicians for the off-label performance of Intacs procedures on keratoconus patients. Such patients much be contact lens intolerant, have clear central corneas, have corneal thickness of 450 microns or more at the sides of the segments, and have only PKP as an option to improve vision. They must be informed that the procedure is likely to only temporize the progression of the cone and that they may need a PKP for definitive therapy. The off-label and temporizing nature of the procedure must be documented in the consent form and medical records.

Cosmetic Botox

OMIC has formally adopted underwriting guidelines for the performance of cosmetic Botox procedures. These guidelines are quite similar to those issues addressed in Paul Weber’s Risk Management Hotline article, “Managing the Risks of Botox,” (OMIC Digest, Summer 2002). The guidelines cover a variety of issues, including training, patient selection, documentation, informed consent, practice patterns, and advertising. OMIC also requires that Botox be administered only in appropriate medical settings.

Pain Management at Surgicenters

For several years, OMIC has extended coverage to ophthalmology-owned surgery centers used by other specialties. Some of these insured surgery centers either currently allow or are interested in allowing pain management specialists to perform pain management procedures at their facilities. With the assistance of the Physician’s Insurer’s Association of America, OMIC researched this issue and found that there have been several extremely large verdicts and settlements of claims involving pain management. Data provided by the American Society of Anesthesiologists offered further evidence of the increased liability exposure of these procedures and also indicated that pain management claims are generally difficult to defend and frequently involve issues with documentation deficiencies and inadequate consent.

As a result of these concerns, the company has determined that it is no longer in a position to insure surgery centers at which pain management procedures are performed. Existing insured facilities will be offered sufficient time to phase out the performance of pain management procedures or to secure coverage through another carrier.

Do You Operate a Surgery Center?

By Betsy Kelley OMIC Underwriting Manager

Why does OMIC want to know? Quite simply, we want to help protect you, your staff, your facility, and your patients from liability associated with surgical procedures. As is often the case, it took some widely publicized patient deaths following procedures at surgery centers and other outpatient settings to remind physicians and patients alike that there are risks inherent in surgery, regardless of where it is performed.

In order to be licensed and accredited, acute care hospitals must have trained anesthesia and nursing staff, emergency equipment, and procedures in place to treat life-threatening complications when they develop. In the past, outpatient settings and surgery centers often were not subject to the same oversight and as a result, patient safety was compromised. Surgeons performed procedures for which no hospital had credentialed them; sedation was administered without monitoring for cardiopulmonary complications; staff had no training in Basic or Advanced Cardiac Life Support; unlicensed staff were given authority to administer medications, and monitor and discharge patients on their own; and centers had no procedures for handling emergencies or transferring patients. In response to poor patient outcomes, some states passed laws to govern outpatient surgical settings.

Areas of Potential Liability

Outpatient surgery is not just a threat to patient safety. It also creates significant malpractice risks for surgeons, their staff, and the facilities where the surgery takes place. Just like acute care hospitals, surgery centers can be held vicariously liable for the negligent acts or omissions of the surgeons who utilize the facility. Moreover, the center can be held directly liable for its own acts and omissions. Plaintiffs may allege that the surgery center failed to appropriately credential a surgeon or failed to take reasonable or prompt action against a problematic utilizer. Injuries may result if equipment is not properly maintained or calibrated or if conditions are not sufficiently sterile; in such cases, the facility likely will be held accountable. Furthermore, employees who provide professional services or assist utilizers may be a source of exposure.

Definition of a Surgery Center

OMIC’s underwriting process is designed to enhance patient safety and reduce liability risk by ensuring that the same standard of care applies to the practice of surgery, regardless of where it takes place. For underwriting and liability purposes, OMIC defines a “surgery center” as: 1) any freestanding surgical or laser refractive facility; 2) any surgical facility (including an in-office surgical suite or in-office laser equipment) utilized by physicians other than the owners and their employees; or 3) any in-office surgical suite used for the performance of surgical procedures other than minor surgical procedures that are routinely done in a physician’s office.

Underwriting Review Required

Because of the increased exposure, OMIC performs additional, thorough underwriting review prior to extending professional liability coverage to surgery centers. (Coverage is not “automatic” and applies only if the surgery center is specifically named in the policy declarations.) OMIC reviews a range of issues, including operations, licensure/accreditation, credentialing, peer review, risk management, anesthesia, and emergency protocols as well as prior insurance and claims history. Before extending coverage, reviewers want to be satisfied that physicians who use the facility are properly trained, licensed, credentialed, and insured; that they and the facility are fully equipped and able to promptly and effectively handle emergency situations as well as routine surgeries; and that the center operates in such ways as to limit its exposure.

Eligibility Criteria for Coverage

To qualify for coverage, a surgery center must first meet OMIC’s eligibility criteria. Ophthalmologists or ophthalmologist-owned entities must hold at least 50% ownership in the facility, and at least one owner, partner, or shareholder must be insured with OMIC. Ideally, the OMIC-insured owner(s) should hold at least 50% ownership in the facility.

The surgery center should be used primarily for ophthalmic procedures. Other specialists may use the facility, but coverage is not available for surgery centers at which certain high-risk procedures, such as abortions, cardiac surgery, laminectomy, pain management, or surgical weight control, among others, are performed. The surgery center also must meet other OMIC underwriting guidelines.

If approved, the surgery center will be named as an insured under the owner’s policy or may be issued a separate policy. The facility may share liability limits with the owner or may maintain separate limits of liability. Premiums are based on the volume and category (ophthalmic, laser refractive, or non-ophthalmic) of procedures performed. The premium may be waived if the facility is used exclusively by the owner-insured and shares liability limits with that insured.

If you operate a surgery center and would like to verify or apply for coverage of the facility, please contact your OMIC underwriting representative at (800) 562-6642.