When Claims Aren’t Covered

Kimberly Wynkoop, OMIC Legal Counsel

Receiving notice of a claim or being served with a lawsuit can be a very stressful and upsetting experience. It is hard not to take it personally. It is imperative that insureds feel confident that their insurance company will be there for them when they need it most. Sometimes, however, claims will not meet the company’s requirements for coverage. This article addresses some of those circumstances and explains what OMIC will do.

Because OMIC is owned and directed by its insured ophthalmologists, we take our responsibility to them very seriously. It is only after careful review and consideration that OMIC issues reservations of rights or denials of coverage. We wish that we never had to send such letters to our insureds, but sometimes it is necessary in order to protect all of our policyholders from inappropriately bearing the costs of claims that fall outside the terms of the policy.

OMIC is legally required to send an insured a “reservation of rights” if there is a possibility that the policy covers some but not all of the allegations or demands in a claim or lawsuit. In such cases, OMIC assigns counsel and defends the claim. OMIC is simply reserving its right not to pay money to the claimant for uncovered activities, allegations, or damages. Some of the most common reasons OMIC reserves its rights include:

The plaintiff is seeking punitive damages. Most medical professional liability policies do not cover punitive or other exemplary damages. In fact, in many jurisdictions such damages are not insurable. OMIC’s policy does not cover these damages, but our defense attorneys are usually successful in getting demands for punitive damages dropped.
The plaintiff alleges intentional acts, such as willful and wanton conduct, fraud, or false advertising. For obvious moral hazards, it is against many states’ public policy to insure for intentional acts. Intentional acts are often alleged so that the plaintiff can seek punitive damages. Again, these claims are rarely successful and OMIC will usually have such allegations removed from the complaint during litigation.
Other allegations for which OMIC provides a conditional defense but no payment of damages are criminal acts, sexual misconduct, acts or omissions caused by the insured’s substance abuse, guaranteed results, and vicarious liability due to an apparent partnership. OMIC’s appointed defense counsel will defend insureds against all allegations, not just those covered by the policy. Counsel will work diligently to have uncovered allegations or damages removed from the complaint, whenever appropriate, so insureds will not be left with uninsured losses, should the plaintiff prevail.
If you receive a reservation of rights letter, don’t be alarmed. Your claims representative should have already discussed with you that OMIC will be reserving its rights and that a letter outlining the issues will be forthcoming. Therefore, such a letter will rarely come as a surprise.
If you have questions about your coverage, please call us. Your OMIC defense attorney will do his or her best to protect your interests. Continuing to work closely with your OMIC defense team will give you the best chance of obtaining a swift and satisfactory resolution to the claim or lawsuit. Rarely, claims or lawsuits are reported that are not covered under the policy. In such a case, OMIC, following communication from your claims representative, will send you a letter to explain the reasons. Some of the most common reasons a claim is not covered are as follows:
The person or entity who the claim is made against is not insured with OMIC. This means that the person named as the defendant is not listed on the Declarations of your policy, or is not an unnamed non-physician employee (except ODs and CRNAs) of a person or entity listed on the Declarations. It is likely that the person sued will have a policy with another carrier, which should cover the claim.
The basis of the claim is not covered by the policy. The OMIC policy has five Coverage Agreements, covering such activities as direct patient treatment, professional committee activities, and premises maintenance. If the lawsuit is based on your alleged breach of an employment contract, for example, the claim will not be covered. You or your practice may carry insurance for non-professional liability claims, such as general liability, employment practices liability, or directors and officers liability insurance. You should alert such other carriers of the claim.
The allegations are excluded by the policy. The Coverage Agreements and General Exclusions provide a list of allegations that the policy does not cover. For example, the performance of various specific procedures, such as micropigmentation of the breast or placement of arch bars on the teeth, are excluded. Wrongful acts, such as intentional invasion of privacy, discrimination, and harassment are also excluded. Insureds should be aware of the policy exclusions and conduct their practices such that uncovered activities are not undertaken or insurance for such activities is provided elsewhere.