Policyholder Services

Entity Coverage (2011)

By Betsy Kelley OMIC VP, Product Management

Digest, Spring 2011

As the lead article illustrates, professional entities face a number of liability exposures. They have direct liability arising from administrative services the entity provides to the practice to facilitate the delivery of health care services. Such functions may include credentialing or supervisory activities, development of practice protocols, and maintenance of the premises. Under the doctrine of vicarious liability, liability for an injury may be assigned to a party who did not cause the injury but who has a legal relationship to the person who did act negligently. For entities, vicarious liability arises from the acts, errors, and omissions (“actions”) of the owners, employees, and other health care providers who render services to the practice’s patients. Ophthalmologist– owners of the professional entity may be held vicariously liable for direct patient treatment provided by others as well. To protect insureds from these exposures, OMIC extends coverage under two separate insuring agreements.

Coverage C—Professional Entities

Under Coverage Agreement C: Professional Liability Coverage for Professional Entities, coverage is extended to the professional entity for its direct liability arising from direct patient treatment provided by the entity and for its vicarious liability arising from direct patient treatment provided by any person for whose actions it is legally responsible, so long as that person was acting within the scope of his or her licensure, training, and professional liability coverage, if applicable. Coverage also applies under Coverage Agreement C to any person or entity affiliated with the insured professional entity in his, her, or its capacity as a member, officer, director, partner, or shareholder of the entity (“member”). This includes not only vicarious liability coverage for claims arising from direct patient treatment provided by others for whose actions they are legally responsible, but also coverage for claims resulting from professional committee activities the member performs for the insured entity. Professional committee activities include formal accreditation, utilization review, credentialing, quality assurance, peer review, and similar board or committee services. Coverage Agreement C does not cover members for direct liability arising from their own direct patient treatment or vicarious liability for the actions of others arising outside of that member’s role as an entity owner. (Ophthalmologists named in the declarations are covered under Coverage Agreement A for these liabilities.)

Vicarious liability coverage provided under Coverage C is conditional. If the claim results from a professional services incident involving direct patient treatment provided by a health care provider not insured under the entity’s policy, the provider must maintain professional liability insurance with a carrier acceptable to OMIC during the term of his or her employment, contractual relationship with, or utilization of the facility of, the insured entity. In the event the provider failed to maintain insurance as required, OMIC will not defend the entity or its members or pay damages or other payments resulting from their vicarious liability for the actions of the uninsured provider. This is why we ask you to provide certificates of insurance for all non- OMIC associates at each renewal. OMIC will defend an insured against allegations of vicarious liability for the actions of others based on an apparent partnership between the insured and another health care provider or professional entity, but supplementary payments and damages are excluded from coverage. If you share office space with health care providers who are not owners, employees, or formal independent contractors of your practice, please contact an underwriting representative to request a “Guide to Apparent Partnership.”

Coverage E—Premises

Limited office premises liability is insured under Coverage Agreement E. The entity and its members are insured for claims resulting from injury to a patient or property damage to a patient’s personal, tangible property caused by a professional services incident resulting solely from premises maintenance performed by the insured or anyone for whom the insured is legally responsible. Premises maintenance refers to the insured’s ownership, maintenance, or use of the office premises in which the insured provides direct patient treatment. Premises liability coverage is subject to a maximum limit of $50,000 per claim/$150,000 annual aggregate. Office misadventures that result from negligent supervision or are otherwise related to direct patient treatment are considered professional liability cases and are not subject to this sublimit. Coverage Agreement E does not constitute and is not meant to replace commercial general liability coverage or other fire and property coverage for the insured’s office premises.

Please note that no coverage will extend to an entity, its non-physician employees, or its members in their capacity as members unless the entity is named as an insured on the policy declarations. If your entity is not listed on your declarations and you would like to obtain entity coverage, contact your underwriter at (800) 562-6642, ext. 639, for an application. Similarly, if you form or acquire a new entity, change the name of your entity, or make any other change in your entity affiliation, please notify OMIC as soon as possible to minimize the risk of uninsured liability.

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An ophthalmologist pays nearly half a million dollars in premiums over the course of a career. Premium paid is directly related to a carrier’s claims experience. OMIC has a higher win rate taking tough cases to trial, full consent to settle (no hammer) clause, and access to the best experts. OMIC pays 25% less per claim than other carriers. As a result, OMIC has consistently maintained lower base rates than multispecialty carriers in the U.S.