One Healthcare Risk Manager's View Of Individual Nursing Malpractice Insurance

This article details the coverage limitations of an individual nursing malpractice insurance policy that must be considered before deciding to purchase such a policy.

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One Healthcare Risk Manager's View Of Individual Nursing Malpractice Insurance

I am often asked to answer this question: "As a nurse, should I buy my own ?" My short answer is if it makes you sleep better at night, it is worth it, but be aware of some significant coverage limitations that the people who sell insurance (NSO/HPSO and ProLiability) don't tell you about and they have a vested financial interest in selling you insurance. An interesting side note to this question is that in recent years, more and more physicians are now employees of hospitals, healthcare facilities or systems, and they never ask about, are marketed to, or purchase their own malpractice insurance to supplement the insurance provided through their employment. This is almost entirely a nursing concern.

By way of background in answering this question, I have been working in healthcare risk management, patient safety and malpractice claims defense since the early 1980's. I have worked in the lawfirm, medical malpractice insurance company, hospital, medical group and integrated healthcare system settings. I am board-certified in insurance, risk management and healthcare risk management. In addition to my private consulting practice, my day job is as a healthcare risk and quality manager. At any one time, I have several malpractice claims that I am working on, and I have handled dozens of malpractice claims involving nursing care. I have years of experience at the malpractice insurance company interpreting insurance policies and applying them to coverage questions.

Because each legal jurisdiction has unique statutory, regulatory and case law that can apply to malpractice and insurance issues, I am speaking in generalities and principles of broad application for this subject for a nurse employed by a hospital or healthcare facility. There may be unique statutory, regulatory or case law where you live and practice that make my opinions more or less applicable to you. You should always ask a risk manager or healthcare attorney experienced in malpractice insurance or malpractice liability as to how things work in your jurisdiction. Not all risk managers or healthcare attorneys have this expertise, but they should be able to refer you to someone who does or someone at the insurance company for the hospital or healthcare facility.

Most nurses buy their own coverage for two main reasons: malpractice and licensure defense coverage. My professional opinion is that for the typical nurse who only provides nursing care through his/her employment and does not engage in ethically-questionable conduct, you will likely never have to use it, and have to decide if the cost is worth the potential benefit. However, it only costs around $ 100/year for the typical nurse, and clearly if you don't buy the policy, you will never have coverage under it, whereas if you do buy the policy, you might have coverage under it.

If your employer does not have liability coverage for your professional duties, you are an independent contractor or you provide professional services outside the scope of your employment with a hospital/healthcare facility, then I strongly advise you to buy your own individual nursing liability policy. In these situations, your own liability policy will be primary, instead of excess coverage. There are also other coverages in the standard individual nursing liability policy that may be useful to you.

A key thing to bear in mind is the reason why it is so cheap is that the insurance companies make few payouts under the policy due to policy clauses that deny or limit coverage for most malpractice claims or licensure defense claims. The overwhelming majority of nursing malpractice claims are covered by the insurance of the hospital/healthcare facility who employs the nurse. Most BON investigations do not result in filing formal charges, and the licensure defense coverage only starts if formal charges are filed. Individual nursing liability policies are very profitable for the insurance companies due to the low combined loss ratio: few claims are paid out, reserved or incur defense costs in comparison to the premium being collected. The people who sell the insurance do not mention any of this.

The majority of individual nursing malpractice policies in the USA are written by two companies: CNA and Liberty Mutual. The two largest nursing insurance agents are NSO and ProLiability.

These agents sell insurance, just as do your local insurance agent, and you can buy other insurance products from NSO and ProLiability. The agents are not the actual insurance companies. The agents collect approximately 15% of the insurance premium as commission to place the actual insurance coverage with CNA in the case of NSO, and with Liberty Mutual, in the case of ProLiability. NSO is owned by Aon, a large insurance company, and ProLiability is owned by Marsh, a large insurance broker.

Out of your $ 100 insurance premium, about $ 85 of that goes to buy the actual insurance. Think about how few claims must be paid, in order to provide $ 1 million of coverage for only $ 85. Compare this to an Ob/gyn paying over $ 100,000 per year in Philadelphia for $ 1 million of coverage. In the medical malpractice insurance industry, the best proxy for the risk of paying claims under the policy is the insurance premium charged. The higher the premium, the more risk to the insurance company and the higher chance of paying claims. In the malpractice insurance industry, individual nursing policies are low risk and high profit for the insurance company.

The insurance policies have pretty standard language in them, and they issue various endorsements to modify the coverage or to meet the unique requirements of a given jurisdiction. One of the best pieces of advice I can give you for any insurance product is to read the policy when you get it. Have a good understanding of what the policy covers and what are the restrictions, before you need to use it. Look online or ask the insurance agent for a sample policy before you buy it, so you clearly understand what coverage you are paying for and the situations in which coverage may be invoked. Ask the agent to explain any policy clauses that you don't understand.

Most nurses buy their own individual malpractice insurance policies to have coverage for malpractice and BON actions. The purchasers think that having their own policy gives them unconditional coverage for these two events and they will have an attorney representing them for these situations. Here is where the significant potential limitations come in. You need to read and understand the policy definitions and clauses that limit coverage, and they are usually called the 'availability of other coverage', or 'other insurance' clauses and 'license defense', or 'license protection' clauses. Unless your policy provides coverage, you will not have your own attorney.

Here is the standard 'availability of other coverage' clause from the CNA policy:

Quote
This Policy is written as specific excess insurance over the insurance policy, self-insured retention, deductible, indemnification, agreement, trust agreement, patient compensation fund, other fund or risk transfer arrangement of any sort ('other insurance') provided by a third party. If any 'other insurance' is available to you, such 'other insurance' must pay first. It is the intent of this Policy to apply only to the amounts covered under this Policy which exceed the limit of any 'other insurance' whether primary, contributory, excess, contingent or otherwise. As such, this Policy will not contribute with any such 'other insurance'.

The practical effect of this clause is that your individual insurance only kicks in if the insurance coverage available through your work does not apply or those policy limits are exhausted. If you are employed by a hospital or healthcare facility that has insurance, your own insurance will not be your primary coverage. It is excess coverage over your employer's insurance. If your own individual coverage is not triggered, you will not have your own attorney representing you. Your own individual coverage will not be triggered unless someone is making a claim or filing a lawsuit naming you individually, and your employer's insurance limits have been exhausted, or their insurance company has notified you that you have no coverage, though a denial letter or reservation of rights letter. This does not happen for the typical nursing malpractice claim or suit. For the overwhelming majority of malpractice claims involving nursing care, the hospital/healthcare facility's insurance policy defends the facility and all employees involved in the suit. The typical hospital/healthcare facility also has lots of insurance coverage (up to several millions) and so the limits would not be exhausted by a settlement or award.

The hospital's insurance coverage likely also has an 'other insurance' clause, and this is often the subject of litigation: if both the hospital/facility and the nurse have malpractice insurance policies with an 'other insurance' clause, which insurance policy is primary and responds? Each jurisdiction probably has appellate case law on this subject, and most of the decisions are that the hospital/facility insurance is primary, while other decisions are that the hospital/facility and the nursing insurance policy splits the responsibility to respond, and a small number of decisions are that the nursing policy is primary. Your own individual coverage may be triggered if you are in one of the states providing that if both the hospital/healthcare facility and the individual nurse both have malpractice coverage, each insurance policy responds as primary coverage. One could argue that in these cases, having your own insurance policy results in a higher chance of adding you as a defendant, to access another set of insurance policy limits.

In most jurisdictions across the country, the employer, such as the hospital or healthcare group or facility, is legally liable for the acts of their employees under the legal principles of 'respondeat superior' and 'vicarious liability' or 'agency'.

This means that if the employee makes a mistake, the employer is responsible for it. Only in rare circumstances would the employer be able to escape legal liability for the acts of the employee. Each jurisdiction has their own case law on the subject, but typically, you may be able to avoid employer liability for criminal acts of the employee or acts outside the scope of employment. For example, if a nurse at the hospital is diverting narcotics, provides them to a family member and that family member dies, the hospital's insurance company may be able to successfully argue that their malpractice policy does not apply since the act of diversion was criminal and outside the scope of her employment. The individual nursing malpractice policy would also likely deny coverage on the basis of the criminal act. For the hospital, they may have insurance coverage under employment liability practices, that they negligently hired, supervised or retained the nurse who committed the diversion.

Many nurses strongly believe that if they make a mistake, the employer will say they were not following procedure, therefore are not covered by the and throw the nurse under the bus. Again, due to 'respondeat superior', the hospital/healthcare facility is most likely still legally liable for the actions of the nurse, and from the hospital's perspective, they want that insurance coverage to pay for the nursing liability. It makes no sense for the hospital to not have insurance coverage, since the hospital would then have to pay any settlements or awards out of pocket, rather than from the insurance company. I also point out that unless the hospital is self-insured, it is the insurance company, not the hospital, that is managing the claim.

Another consideration for any malpractice payouts is the lack of a 'consent to settle' clause in the nursing liability policy.

Most physician malpractice policies have a clause requiring the consent of the insured to settle any case. Since claim settlements can be reported to the National Practitioner Data Bank and/or the state disciplinary agency, most physicians want to be involved in the settlement decision. The standard individual nursing malpractice policy does not have this clause. The insurance company will make a decision as to settling the case or not, and this decision may be driven primarily on what is cheaper to the insurance company: defending the case or settling it, regardless of the wishes of the insured nurse.

In regards to representation before the BON, if you read the CNA policy, coverage is only triggered if the BON actually files charges against you. Typically, the policy provides up to $ 25,000 reimbursement for legal expenses. You have to find an attorney, usually pay them up front, and apply for reimbursement from the insurance company. Coverage is not triggered and there is no reimbursement if the BON is only investigating you. If you want an attorney representing you during the investigation, you will pay for this out of pocket.

Although there is much concern over the BON, the majority of investigations and charges typically involve allegations of diversion, theft from patients, substance abuse, boundary violations, criminal acts, and quality of care issues. Most nurses go their entire career without dealing with the BON, although this certainly varies from state to state.

This has been a high-level overview of a complex subject and insurance coverage and claim issues will always revolve around the facts of a given case, the language of the insurance policy and the unique statutory, regulatory or case law in a particular jurisdiction. If you think you might be involved in a malpractice, licensure defense or any other type of claim that you think is covered by your policy, contact your professional liability carrier, ask them to open a claim file and describe the situation to the claims manager. The company will use the facts of the case, apply it against the coverage agreement in the policy, and officially notify you if you have any coverage or not. If not, they will send you a coverage denial or a reservation of rights letter, and this is your notice of no coverage or coverage with conditions attached. If you have coverage, they will send you a letter confirming this and assign a claims manager to work with you. Tell them I said hello.

In summary, I would recommend purchasing your own individual nursing malpractice liability policy, but don't necessarily expect that the policy will automatically provide coverage for any malpractice or licensure issues that you are involved in.

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RiskManager

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Specializes in Critical Care.

Thanks for all the info. I don't have individual , but I know the hospital does. When I was a new nurse a patient fell in the bathroom when they got up by themselves and broke an ankle. I wasn't even the patient's nurse that day, but I answered the call light, found the patient on the floor, got help and we picked her up and got her back to bed. The patient filed a suit against the hospital and the nurse individually. I was told they would have filed one against me as well, but I didn't have insurance. It was scary and confusing, but it made me glad I didn't have insurance. Do you know why I would have been sued as well? I wasn't the patient's nurse and I safely got the patient back to bed by lifting the patient who didn't bear any weight in the transfer to bed. I was the charge nurse that night does that have anything to do with it. Depositions were done and I heard nothing after that so I guess the hospital settled the case.

Over my many years as a nurse this is the only time I was involved even peripherally in a law suit, even though patient falls unfortunately still have happened.

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Am I understanding correctly that you are a risk manager/claims manager, but that you are not a lawyer?

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Specializes in M/S, Pulmonary, Travel, Homecare, Psych..

I recall going to orientation once, for a travel position, and the other nurses were all talking about how having your own coverage is bad. Their theory was that it makes you more of a target, because the lawyers from the other side of the case think there is money to be won. That never made much sense to me.

I'm starting a new position in Home Healthcare soon, I'll have to find out what kind of coverage they have.

Thanks for the article. Nice to get away from the assumption filled chattering and learn a little about how it really works.

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Specializes in pediatrics, public health.

Thanks for an interesting article!

I do have a question. You mention in your article that having individual could potentially make a nurse more likely to get sued. What I don't understand is, how would the insurance company know which nurses do or don't have their own insurance?

Thanks!

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I feel when your getting the information about insurance; personally I would ask what are the boundries that the insurance covers. Not all Nurses going in front of the BON are there do to malpractice. Will it cover them in a case that isn't a malpractice suit? I think there has been some confusion of what it does cover. Some feel they are protected with the insurance and find out that the coverage they have is ONLY for malpractice.

I feel, as Nurses, we need someone in each State that is a 'go to person', for legal questions. Most Lawyers will not give information without a retainer fee. I'm talking for specific legal questions; the what ifs. If anyone knows of an agency, possibly in your own state, that is totally unbias to either insurance and or business end of the Medical entities, let me know.

Thank you for your article, it was very informative.

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Specializes in Healthcare risk management and liability.
noahsmama said:
Thanks for an interesting article!

I do have a question. You mention in your article that having individual liability insurance could potentially make a nurse more likely to get sued. What I don't understand is, how would the insurance company know which nurses do or don't have their own insurance?

Thanks!

Sorry for the delayed response; we have been moving these last several days and I have been away from the computer. The only way one would find out if a nurse has insurance would be to ask. The persons most likely to ask, after a claim has occurred, would be the plaintiff attorney and/or the hospital's insurance company.

If the nurse has his/her own insurance, and they are in a state in which their own insurance is primary or responds equally with the hospital's insurance, then that represents another set of policy limits to pay the claim. The more insurance policies plaintiff counsel can tap, the higher the potential recovery. Also, in some cases, the hospital's insurance company may seek to limit their financial exposure to the acts of the nurse. If the nurse has his/her own insurance, then the hospital's insurance company may subrogate the claim or tender the defense of the claim to the nurse's insurance company, and tell the nurse's insurance company to either pay up or take over the defense of the claim/lawsuit. There would be no financial incentive to do this if the nurse does not have an individual nurse malpractice policy. Remember that the hospital/healthcare facility is legally liable for the acts of the employee under 'respondeat superior', but this does not prevent the hospital's insurance company from trying to limit their financial exposure by shifting the responsibility for paying for that liability. If the nurse has an insurance policy, that can make it financially viable to shift that responsibility to the nurse's insurance company. If the nurse does not have a policy, it would generally not make sense to go after them financially, unless they are independently wealthy with lots of liquid financial assets to seize.

So what this all means is that after a claim/lawsuit is filed, discovery is conducted of the staff, and one of the questions that may be asked is if they have their own individual policy. If the plaintiff attorney or the hospital/facility's insurance company then decides to go after that policy, the nurse will likely be individually named in the claim or lawsuit as a defendant so as to trigger the coverage and then we are off to the races. The sticky wicket for the nurse in that instance is forever more, they have to answer 'yes' to the licensure/employment/credentialing questionnaires asking if they have ever been named in a malpractice claim or suit.

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Specializes in Case mgmt., rehab, (CRRN), LTC & psych.

I am starting a graduate nursing program next month, and the university required me to purchase a policy as part of the pre-admission process.

Prior to that purchase, I hadn't had nursing liability insurance since 2008. However, the $100 spent on a policy is cheaper than one hour of legal consultation, so the peace of mind can be very much worth it.

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Specializes in Healthcare risk management and liability.

^^^Let me put in a plug for asking your facility risk manager for advice and counsel on these sort of risk management issues. This is why they are paid the medium-sized bucks: to help and assist the staff with questions about this stuff. Not all the risk managers are insurance or malpractice experts though, but hopefully they can put you in touch with someone who is.

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Specializes in Pediatrics, developmental disabilities.

What a wealth of information. Thanks for sharing this!

I am an advocate for nurses with disabilities. Recently, I was asked if a nurse with a disability should obtain "extra" in case an incident was blamed on the nurse's disability.

Appreciate hearing your perspective on this!

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Specializes in Healthcare risk management and liability.
Donna Maheady said:
What a wealth of information. Thanks for sharing this!

I am an advocate for nurses with disabilities. Recently, I was asked if a nurse with a disability should obtain "extra" malpractice insurance in case an incident was blamed on the nurse's disability.

Appreciate hearing your perspective on this!

Speaking as someone with a disability (bilateral hearing loss), I don't believe the presence of a disability in and of itself would be reason to purchase higher limits of . If the nurse in question is employed by a hospital/healthcare facility, he/she is still pretty much going to be covered under their insurance as noted above, and that insurance could care less about any disability. Unless a claim occurs and the disability is a cognitive or physical one that would increase the chance of a future claim. In that case, the insurance company will be having a conversation with the hospital/healthcare facility about imposing a surcharge or modifying the assignment of that nurse to deal with the increased exposure to the insurance company.

The final issue is that last time I checked, for the typical floor nurse, I believe that $ 1 million is the maximum policy limits that can be purchased. You can purchase higher limits if you are a nurse practitioner, midwife or CRNA.

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RiskManager said:
The final issue is that last time I checked, for the typical floor nurse, I believe that $ 1 million is the maximum policy limits that can be purchased. You can purchase higher limits if you are a nurse practitioner, midwife or CRNA.

In my state, Proliability offers three levels of coverage for generalist staff RNs, up to a max of $2mil/$6mil.

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