Your Practice Made Perfect
This podcast series provides support, protection, and advice for today’s medical professionals. Brought to you by SVMIC, a mutual insurance company that is 100% owned and governed by our policyholders.
Jun. 01, 2018
Episode 018: Read the Coverage
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Speaker 1: You are listening to Your Practice Made Perfect; support, protection, and advice for practicing medical professionals. Brought to you by SVMIC.
Brian: Hello. Thanks for joining us for today's podcast. I'm Brian Fortenberry, and joining me today to talk about coverage and policies, and all of that kind of stuff that is going to be very, very beneficial is Charmy Shrode. Thanks for joining us.
Charmy: Thank you for having me.
Brian: Before we get started, Charmy, tell us a little bit about yourself. Tell us about your time here at SVMIC and your experience in the insurance world, and in particular, medical professional liability.
Charmy: I have been in medical professional liability insurance for 30-plus years. For 10 years, I was with a company in Texas, and have been here at SVMIC for a little over 20 years. Most of that time has been in the underwriting department. My first stint was in marketing, but the rest of it has been in the underwriting area. Today, I serve as Vice President of Underwriting here at State Volunteer.
Brian: Well, this is going to be eye-opening probably for some people because if I'm honest, and I think if most people are honest, when it comes to policies themselves, you have homeowner’s policies, and auto policies, and life insurance policies, and healthcare policies. When I get my policy that comes in the mail, I often open it up, the first thing I go to is how much is it going to cost me, and then where is my card of proof of insurance or my letter of certificate of insurance as proof of that, and then my policy documents often find a nice home either in a safe or a lock box. Then, the only time I ever really get them out to read them is if there's a problem. That might be too late at that point to know exactly what I have. Let's start with, what is a policy? Why is it important that instead of just discarding it into the lock box that they read the policy and know what's in there?
Charmy: Well, the policy is an actual contract between the insured and the company. It is a formal document that outlines the company's responsibilities to you as the insured and your responsibilities as the insured back to the company. It also outlines any kind of exclusions and so forth that are in that. All of that is very important. Insurance is regulated by each state, and so as you go into different states, those requirements are determined by that state in which you are getting a policy from. The nuances between policy in Tennessee versus Georgia, versus California are all going to be different. Even though you're getting it from the same company, like you said, your auto insurance, you may be getting it from State Farm in California, your State Farm policy in Tennessee might be different because of the requirements of the insurance regulation in that state. Not all policies are created equal within company to company, as well as from state to state. It's real important to actually read your policy. Now, years ago, that was a very difficult challenge because they would use a lot of insurance terms, and a lot of ...
Brian: You had to have a lot of great understanding.
Charmy: You really did. Probably about 25 years ago, there was this real push to take the policies and move them into plain English. I think you would find that most policies today are fairly understandable if you just take the time to read through those. But today, we can go over a few of the highlights of the most common things, especially with professional liability that you would want to take notice of.
Brian: I really like the point of it is made to where you understand it, and I think anytime, any of us, if we're always asked to sign to contract, there's very few people that go and just sign a contract and never read it, and never know what's in there. The image of this is truly a contract, a legal, binding contract between you and a company, and what your obligation is, and what their obligation is, really to me, highlights the importance of going out and reading that. As you said, from state to state, it not being the same in company to company, it's really important to understand that. As you said about some of the differences and some of the main things that are in a, in particular, we're talking about medical professional liability policy. Let's talk about some of the coverage in the policy itself. I hear terms like claims made versus occurrence out there. What are the differences in those two, and why are they important?
Charmy: There's a fairly significant difference between the two. In a quick summary, an occurrence policy, you have to have coverage in place when the even occurred. Most of your policies like your auto policy, for example, when you have a wreck in your car, if today you have the wreck and you had an active policy on the day the event occurred, then you have coverage for that claim. Let's say, it was a significant wreck and you're in the hospital for several weeks, and your policy actually expired while you were in the hospital, the fact that you reported it a few weeks later does not negate the coverage even though it's inactive, because at the time it occurred, your policy was in force.
Brian: That makes perfect sense.
Charmy: With a claims made policy, at the time the claim is made, you have to have an active policy in force.
Brian: When you say when the claim is made, what does that mean?
Charmy: When it is reported to the insurance company.
Charmy: Let's use that same example of the auto claim. You have the event today, you're in the hospital, and two weeks later, you tried to report that claim. That's when the claim is actually being made to the company. At that time, you have to have an active policy in force. Most of your medical professional liability policies are claims made, and so your report day is what triggers coverage. That's the thing that you want to read through when you look through the policy, is about the report dates and what triggers policy coverage.
Brian: That is really important, then, to understand how your policy works because if you have an occurrence policy by any chance, and as you said, those don't seem to be as prominent as a claims made policy in this type of insurance, then you're really going to have to make sure that your policy is active. Let me ask you this then. If your policy is not active, say you're in a state and you have a professional policy that's in place, and you canceled that policy for whatever reason, and you had coverage all of that time that you were in that practice but you canceled that policy, you were saying you had to have a policy in place in order to report it or at the time the claim is made, how does that work? Is there coverage there?
Charmy: If you don't have an active policy in place, there is an option to purchase an endorsement at the time of cancellation that attaches to that once active policy. That endorsement follows the terms of the active policy, but what it does is it extends the reporting privileges to beyond the active policy term. What that endorsement is generally referred to is tail coverage, and what that does is it allows you to report things today that occurred while you had an active policy. Often times, in medical malpractice or professional liability, you may not know that you had a bad outcome or that there was a bad effect to an incident until weeks, or even possibly a year, after the incident happened. It's very possible that you will need to report an incident a year or so after the policy was actually in place and the occurrence day. This tail endorsement allows you the option to continue to report should you need to, an incident after the termination date of that policy.
Brian: There is an endorsement then that can be added to the policy to allow you to continue to be able to report claims for a period that you had already canceled or had rendered medical services during that point.
Charmy: You also often have the opportunity to pick up your prior acts with the company that you are going to, which basically works similar to what your tail endorsement would be on your expiring policy. Instead of adding to the policy that you're leaving, it picks up reporting rights to the exposure that you left but under your current policy.
Brian: I got you.
Charmy: That's referred to as prior acts coverage, and some people refer to it as nose coverage.
Brian: Nose and tail. I get it.
Charmy: Nose and tail. You have the tail on your expiring policy for continuing to report if you want to do that, or you pick up prior acts or nose coverage on your new policy. Either way, it's important under a claims made policy to either endorse one way or the other. You either need to purchase reporting endorsement tail coverage on your expiring or you need to pick up prior acts under your new policy. Otherwise, an incident that you don't yet know about comes up and you try to report it, there would be no coverage for that. It's important to understand, is the policy you're going to, that you're taking on now, is it a claims made or an occurrence form, and then what are your options on purchasing tail coverage at the end of that policy.
Brian: Just from listening to you, I think it's critical that people understand that obviously, you need to read the policy but make sure you understand what the ramifications are once that policy is inactive or ends, because if you're left without insurance coverage for a procedure you performed six months, a year, a year and a half, two years ago, you're going to be almost like bare where there's no coverage at all, and there's not going to be any legal expenses, there's not going to be any settlement amount, or if you, heaven forbid, had to go to trial and a jury verdict, all that money is going to be nowhere to go to collect it, right?
Charmy: That's exactly right.
Brian: That's a huge reason to make sure you understand what your policy does once you get ready to close it out. When it comes to integral parts of a policy, what are some things out there that are common across medical professional liability policies that you're going to find in a lot of policies regardless of maybe the state, or maybe even the company, but that are a little different that you might need to know, it may say this, or say that, and that would be important for you to know what to expect if a claim were to be made or reported?
Charmy: Most of your policies issues said are generally very similar. A professional liability policy is going to generally cover you for medical professional services that you rendered or should have been rendered to a patient. That is a general broad scope definition of what the policy is. What you want to look for is what is considered a notice of report, what is considered a claim. In Texas, you might find where you actually have to be served suit papers in order for your policy to be triggering coverage. State Volunteer’s policy, you can report an incident. Meaning you just walked out of the operating room and it didn't go exactly like you planned, and you're going, "I just don't feel good about this." You can pick up the phone and call State Volunteer and say just that, you're reporting an incident. The patient hasn't claimed damages, you don't even know that there are damages, so obviously a suit hasn't been filed but it just didn't go the way you intended for the outcome to be. When you report that to State Volunteer, we consider that as a notice of claim, and it triggers coverage at that point. Backing up just a little bit, when we were talking about tail coverage, once a claim is reported and they accept that claim as their responsibility to defend, that company is obligated to continue to defend that claim from then on until resolution.
Brian: Even if the policy's inactive or canceled?
Charmy: Once the company accepts the claim, they're obligated. That's why it's important to understand what triggers coverage.
Brian: Very important.
Charmy: What is a notice of a claim. Because if you call them and say, "I had this bad outcome," and they say, "Thank you, sorry about that. Call us if a claim actually gets filed," they have not accepted that claim, they have no responsibility yet. So if for some reason the policy becomes inactive, you still have not reported that claim to them in their eyes. You have no coverage from them. What triggers a notice of a claim is real important. You'll see incident, you'll see claim, and you'll see suit in the verbiage of the policy document. Look through that and then go to your definitions page of the policy and see what they're actually defining, how they're defining an incident, a claim or a suit, and what is actually triggering coverage.
Brian: I know, often, in some of the policies that I had seen and had, there are these words within the policy that are somehow delineated as different. Either bold italicized, or something like that, and generally that has been in some of my policies, that there is a specific definition that that company has in that contract for what that word means, correct?
Charmy: You're right, Brian. I think that's pretty traditional. In fact, it may actually be required by insurance code, that any word that has a defined term is actually bolded when you're reading through the policy language. You know, then, if you're not sure exactly what they mean by the word “insured”, or “first reported”, you can go look in your definitions page and get a little bit more clarification on what that means.
Brian: That is very eye opening because if you go from company to company, too, for certain, maybe in your last company, like you were saying, you were used to waiting to have to either get the suit filed and you get papers in your hand to hand over to the company, that was reporting suit. Whereas, if you've gone to a company like that and you were used to, hey, once I make a phone call and let them know I am concerned, that equals reporting it. That could be an area that you could find yourself in gray territory if you're between companies. SVMIC, they do the once you call, you don't have to have papers in hand, right?
Charmy: That is correct. From the very beginning, that language has been in our policy documents. The reason for that is, first of all, we are physician-owned company. We are here for the physician. Physician's heart and soul is to take care of patients. When something doesn't go quite right, then they're disturbed by that.
Charmy: They need to talk that out with someone. When you call State Volunteer with that concern, first of all you're going to get a claims attorney to help you address that, but we feel that by being involved on the very front end, we are able to help navigate that physician through this process. We don't want them to panic, we don't want them to feel obligated to go back and right something in the chart that might not have been there to begin with, or conversations that they might have with the patient or the patient's family. This allows best opportunity for success down the road. We encourage our physicians to call anytime so that we can help them walk through that process.
Brian: The words on the page are what they are, and they're written in a way that the heart and the intent of the policy seem to be very different. At least, from company to company, that could be an issue. It could be what the intent or the heart behind that is. A lot of people feel like, "Oh they're just trying to get out of covering this." It seems that SVMIC's approach, at least listening to you, is more encompassing of really wanting to be there for the physician rather than trying to find a way to get out of coverage.
Charmy: You're right. It's hard when you look at the policy, you might just overlook that. You look at notice of a claim, because a physician's not going to be thinking about the nuances of that, and the ramifications of having to wait until a suit is actually filed in order to get assistance from the company on that. A perfect example is I was speaking with an office manager just the other day. They had a radiologist that was being asked to give a deposition in a claim, they have not yet been served. But the radiologist was asked to give a deposition on the events of that same incident that they read. We are right there with that physician and provide them legal defense, legal assistance is the way we call it, to help them, guide them through the deposition. What we don't want is to send them out there on their own and answer questions to this deposition that might actually inadvertently put them in a position to being sued because of the opinion that they just gave.
Those types of things, you're not necessarily going to find within the policy language, but that is what goes behind the heart of State Volunteer. Any way that we can find ways to protect the physician, we understand that this is their reputation at risk.
Charmy: We are here to make sure the policy language and the way we interpret the policy language is at all times the opportunity to protect that physician as best we can.
Brian: I love the idea of knowing that someone is going to be there in a difficult situation to hold my hand, and make sure I don't make a critical mistake going through the process, and being there from the very beginning is crucial. Certainly there is a lot to cover when it comes to policy documents, policy information, and coverage, so join us on our next episode as we continue our discussion with Ms. Charmy Shrode regarding policy intricacies and coverage on our next podcast episode.
Speaker 1: Thank you for listening to this episode of Your Practice Made Perfect, with your host, Brian Fortenberry. Listen to more episodes, subscribe to the podcast and find show notes at svmic.com/podcast. The contents of this podcast are intended for informational purposes only and do not constitute legal advice. Policy holders are urged to consult with your personal attorney for legal advice, and specific legal requirements may vary from state to state, and change over time.
The contents of this Podcast are intended for educational/informational purposes only and do not constitute legal advice. Policyholders are urged to consult with their personal attorney for legal advice, as specific legal requirements may vary from state to state and/or change over time. All names have been changed to protect privacy.
About our Guest
Charmy Shrode is Vice President of Underwriting at State Volunteer Mutual Insurance Company (SVMIC). Mrs. Shrode received her Bachelor of Science degree in Business Administration and Finance from Wayland Baptist University in Plainview, Texas in 1986. She received her Certified Insurance Counselor (CIC) designation in 1992. Mrs. Shrode began her insurance career in 1987 in the marketing department of American Physicians Insurance Exchange (API) in Austin, Texas. During her 10 years with API, Charmy received multiple promotions, with her last being Vice President of Underwriting. After being recruited by SVMIC, she and her family moved to Tennessee in 1997. Charmy has been a member of Physician Insurers Association of America (PIAA) since 1989 and has served on the Regulatory Affairs Section for many years. She now serves on the Underwriting Section. Charmy and her husband, Daniel have been married since 1987 and have two boys.
About our Host
Brian Fortenberry is Assistant Vice President of Underwriting at SVMIC where he assists in evaluating risk for the company and assisting policyholders with underwriting issues. He has been involved with medical professional liability insurance since 2007. Prior to his work at SVMIC, Brian worked in the clinical side of medicine and in broadcast media.