Insurance Glossary

All the property and financial resources owned by an insurance company. Admitted Assets are liquid and can be used to raise cash to pay claims. Non-Admitted Assets are assets, such as real estate and other equipment, not easily made liquid.

A written notice that an insured receives from a person or entity to hold the insured liable for damages or injury covered by the insurance. A claim can include a demand for money or services and/or the serving of a suit.

When medical malpractice insurance carriers evaluate a physician, they will review claims history for frequency and severity. The more claims a physician has had in the past (frequency) leads carriers to believe that, if nothing has changed, more claims will arise in the future. The severity of each claim refers to the amount of the settlement or financial liability resulting from settling a claim.

A policy providing coverage that triggers when a claim is reported during a valid policy period. The medical incident must have occurred after the retroactive date and before coverage expired. If you leave a claims-made policy, your retroactive date must be transferred to your new policy or you must arrange for extended reporting coverage.

Funds set aside to satisfy those claims that have been reported to the company but not yet resolved or paid.

In a medical malpractice insurance policy, there is a “consent to settle” clause unless specifically stated there is no consent to settle. This is extremely important because a “consent to settle” clause allows you, the physician, the right to refuse a proposed settlement and go to trial. If there is not a “consent to settle” clause, the insurance carrier has the right to settle a case without your consent.

Unlike some carriers in the industry, Conventus’ policy does not contain a Hammer Clause, which would put the financial liability back on you if the case settles for more than the original agreement.

The date a medical incident of alleged malpractice took place. This is also called “date of occurrence.”

The date the incident was reported to the insurance company.

This is the portion of the policy that states information such as the name and address of the insured, the policy period, the amount of insurance coverage, premiums due for the policy period, and any coverage restrictions.

Allows the insured to pay an amount of the “first dollars” of a claim payment and to pay a lower premium for assuming this risk. Sometimes due to claims history, carriers will force an insured to be responsible for a deductible.

A carrier’s gross written premium.

A partial return of premium to policyholders based upon COBP plan results.

The portion of premium that applies to an actual coverage period. For example, you pay your entire year’s policy upfront for $12,000. If eight months later you decide to cancel your policy, the earned premium is considered eight months ($8,000) and your unearned premium is considered four months ($4,000).

An amendment added in writing to an insurance contract or policy. An endorsement can include additional coverage or exclude certain coverage.

The expense ratio is calculated by dividing all expenses by net written premiums. Usually, but not always, the lower number is better. This is important because the expense ratio can reveal the true cost to produce and provide an insurance company’s services.

The system of rating or pricing insurance in which the future premium reflects actual past loss experience of the insured.

In a claims-made policy, if a policy period ends and is not renewed, a physician needs to arrange for extended reporting coverage from their carrier. This is known as a “tail,” if purchased from your prior carrier, or “Prior Acts,” if purchased from your new carrier. If this coverage is not purchased, the physician is considered to have a “gap in coverage.” This can be a problem because:

• the physician would be personally liable for any claims that arise during the gap in coverage;
• a new carrier may refuse to provide new coverage if you have a previous gap;
• New Jersey regulations require that the physician has continuous coverage with no gap.

An occurrence that the plaintiff claims has led to culpable injury.

An insurance company’s payment to a plaintiff in settlement or adjudication of a claim.

This is the maximum amount a carrier will pay for all claims that occurred and were reported during a given policy period. Therefore, if your policy limits were $1M / $3M, you have up to $1M per claim and up to $3M for all claims reported in that policy period.

A substitute physician who temporarily takes the place of a physician member of a medical group. This coverage will be contingent upon a member physician not practicing during the period in which the Locum Tenens coverage is in effect.

In a claims-made policy, premium is developed using a step rating system. Since most claims tend to be filed three, four, and five years after an incident, the first four years of a new claims-made policy will be discounted from the mature (full premium) rate. For example, you will hear carriers tell you, “You are fourth year claims made.” This means you are in your fourth year of having a claims-made policy and the discount received has been reduced over that four-year period. Once a physician reaches the fifth and mature claims-made year, they will remain at that level until an extended reporting period is in effect.

Modified Claims-Made triggers coverage like a claims-made policy but prepays extended reporting coverage. You don’t have to purchase a “tail” if one is required for your circumstances.

An occurrence policy protects you from any covered incident that “occurs” during the policy period, regardless of when a claim is filed. An occurrence policy will respond to claims that come in – even after the policy has been canceled – so long as the incident occurred during the period that coverage was in force.

The amount of money a policyholder pays for insurance protection.

An agreement between insurance companies under which one accepts all or part of the risk or loss of the other. Most primary companies insure only part of the risk on any given policy. The amount varies among carriers.

Under a claims-made policy, coverage provides insurance for claims arising from incidents that occurred while a previous claims-made policy or policies were in effect, but that were not reported until that policy (or the last in a succession of policies) was terminated. With retroactive coverage, the new policy covers such claims. With such coverage, purchase of tail coverage from the previous carrier is not necessary.

A systematic approach used to identify, evaluate, and reduce or eliminate the possibility of an unfavorable deviation from the expected outcome of medical practice.

Surplus contribution is the amount of capital insureds must provide for a mutual company or reciprocal exchange.  This is often collected during the early years of the company’s operation. As the company stabilizes and grows in financial strength, earned surplus from profits is added to the contributed surplus, and the contributed surplus can potentially be returned to the early policyholders.

When a physician decides to stop practicing medicine in a claims-made policy, or switches to an occurrence (or occurrence type) policy form, they are required to purchase an extended reporting endorsement known as the tail or tail coverage. If you no longer have an active policy, you would be liable for any claims that are presented today for incidences that happened when you had a claims-made policy. Therefore, the tail coverage provides you with permanent protection for those previous years of exposure from your retroactive date to your date of cancellation. Most carriers will offer free tail provisions if physicians meet certain criteria, such as retirement, death, or permanent disability. When necessary, tail coverage is purchased from an insured’s previous claims-made carrier and the cost is based upon a filed factor applied to the prior year’s premium.

Liability for the acts of someone employed, or contracted, by your practice.