Risk Management

Incompetency: Reporting and Coverage

By Kimberly Wynkoop

OMIC Legal Counsel

Digest, Spring 2010


Insureds may have to deal with incompetency issues from either the side of the impaired physician or as an evaluator of one of their peers. There are policy issues to consider from either perspective.

When an insured is the physician with potential competency issues, he or she has affirmative reporting duties under the OMIC professional and limited office premises liability insurance policy. Under Section VIII. General Conditions, Rules, and Duties, of the policy, Subsection 2, insureds agree to update OMIC immediately, in writing, about any changes to the statements they made in their application. If the insured fails to notify OMIC within thirty days of the change, OMIC has the right to deny coverage of a claim related to that change, or to cancel the policy. More specifically, Subsection 3 requires insureds to give OMIC written notice within thirty days of certain specific situations, including the insured being advised to or undergoing treatment for substance abuse or psychiatric illness and the insured suffering from an illness or physical injury that could impair his or her ability to practice ophthalmology for thirty days or longer. Regarding group policies, the policyholder has the duty to act on behalf of all insureds under the policy. To the extent the policyholder or its representative is aware of an insured’s incompetency, it has the duty to inform OMIC (Section VIII.1).

What occurs after the insured notifies his or her underwriter depends upon the specific facts and circumstances of the insured’s situation. The underwriter will require complete details of the impairment or incompetency, including its nature, date of origin, whether treatment has been sought, prognosis, and whether the insured has been cleared by his or her treating physician to continue practice (if applicable).  Underwriting will require a letter from the treating physician or treatment program coordinator confirming this information. Underwriting also will want to know if the impairment or condition has affected the insured’s licensure or hospital privileges.

Underwriting will evaluate all of these factors, either by staff or through the physician review process, and will determine whether and under what conditions OMIC can continue providing coverage to the insured. If the insured is cleared for a reduced scope of practice, reduction in the coverage classification may be warranted. If the insured is temporarily unable to practice, he or she may be eligible for a suspension of coverage. If serious action has been taken against the insured’s privileges or licensure, such as suspension or revocation, OMIC may determine that it is no longer in a position to insure the doctor. OMIC generally takes the least restrictive action that is prudent for the company and its members.

For patient safety reasons, and because such claims can be extremely difficult to defend, OMIC does not cover claims arising from insureds’ performance of direct patient treatment while under certain impairments. For instance, Section III.B.4. of the policy provides that “OMIC will defend an insured because of a claim otherwise covered by this policy that arises out of, but is not solely limited to, the following; however, under no circumstances will OMIC pay any damages or supplementary payments except Claim expenses resulting from either settlement or judgment attributed to…an act, error, or omission (a) committed while the insured is under the influence of alcohol, drugs, or other substances that adversely affect the Insured’s professional ability or judgment or (b) that results from substance abuse.” If the insured’s condition leads to restrictions on or the loss of his or her licensure (including DEA license), be aware that the policy (Sections III.A.2. and III.A.3.) provides that OMIC will neither defend an insured nor pay damages or supplementary payments because of a Claim that arises out of direct patient treatment or dispensing of controlled substances that occurred in violation of a restricted or revoked license.

In order to financially assist insureds who leave practice due to incompetency and disability, if the insured is judicially determined to be incompetent or is permanently and totally disabled, OMIC provides the insured with free tail coverage upon termination of the policy. In order to receive this benefit, OMIC must receive written notice of the insured’s condition and the policy premium must be paid through the date of termination.

Conversely, an insured may be called on to evaluate another physician’s competency. OMIC’s policy offers protection for this evaluation in certain situations. Coverage D provides defense and payment of damages and supplementary payments for the insured’s professional committee activities performed for (a) a state licensed health care facility or clinic that is not the professional entity with which the Insured is affiliated as a member, officer, director, partner, or shareholder or (b) a professional association or society. Professional committee activities are defined as service of an insured while acting within the scope of his or her duties as a member of, participant in, or person charged with the duty of executing the directives of, a formal accreditation, utilization review, credentialing, quality assurance, peer review, or similar professional board or committee. A conditional defense is provided to insureds performing professional committee activities in good faith who are sued for such wrongful acts as slander and defamation of character and alleged anticompetitive activities.

If you have questions about your policy coverage, please call your underwriter for assistance. For help determining what steps to take with a suspected incompetent peer, please call OMIC’s risk management hotline.

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