Hot Topics in Insurance Law for Health Care Providers

Transcription

1 Hot Topics in Insurance Law for Health Care Providers Michael W. Huddleston

2 Professional Liability Issues

3 Punitive Damages Medical Professional Liability Sec COVERAGE FOR EXEMPLARY DAMAGES. (a) Except as provided by Subsection (b), a medical professional liability insurance policy issued to or renewed for a physician or health care provider in this state may not include coverage for exemplary damages that may be assessed against the physician or health care provider. (b) The commissioner may approve an endorsement form that provides for coverage for exemplary damages for use on a medical professional liability insurance policy issued to: (1) a hospital; or (2) a for-profit or not-for-profit nursing home or assisted living facility. TDI CHECKLIST: "No policy of medical professional liability insurance issued to or renewed for a physician or health care provider may include coverage for punitive damages that may be assessed against the health care provider or physician. However, the commissioner may approve an endorsement form that provides for coverage for punitive damages to be used on a policy of medical professional liability insurance issued to a hospital or to a nursing home."

4 Punitive Exclusions ISO AP070LMS-0911 Punitive, exemplary or multiple damages excluded Equitable relief excluded Fines, penalties, court sanctions, return or restitution of legal fees, costs or other expenses associated with such awards Fines or penalties exclusions Public Policy Fairfield and ResCare

5 Bad Acts Exclusions Fraudulent, criminal, or willful act or omission excluded if Applies when a final, nonappealable adjudication in underlying suit Without this limit, adjudication in coverage case could kill defense obligation Does it apply to such action by "an insured" or "the" insured? Acts of CFO, CEO or Chief Operating Office shall be imputed to the organization

6 Medical Equipment Professional Liability Wrongful act an act, error or omission in violation of any right granted under state or federal law or guidelines relating to your business Professional services: Includes the providing of medications, medical supplies or medical appliances. Medical equipment and supply exclusions Damage arising out of or resulting from the sale, lease, loan or use of specified equipment. Typically excluded from CGL. Nat'l Union v. Radiology Assoc., 694 FSupp2d 658 (SD Tx 2010)

7 Anti-Stacking Clauses Multiple separate professional liability policies issued to multiple related insureds Dr. 1 $1m Dr. 2 $1m P.A. $1m Hospital $1m Each policy says that if more than one policy issued by the company is involved, only one limit will apply Example single limit (highest) applies for all insureds $1m instead of $4m

8 Anti-Stacking Arguing Against Such Clauses June 2014 Commercial Umbrella Checklist Tex Ins Code ch "Other insurance" clauses or similar provisions should not contain "antistacking" or "non-cumulation" language that excludes or limits coverage in other separate but applicable policies that are issued by the same company, affiliated companies, or by other unaffiliated companies. It is permissible to state whether the coverage in one policy is primary or excess over other applicable policies, or to coordinate limits in proportion to total limits available in applicable policies.

9 TDI Checklist Continued June Checklist TDI will consider for approval anti-stacking language if: the anti-stacking provision is limited to the same "occurrence" and the other coverages are in the same policy or package issued by the same company, or There is a practical and fair purpose, such as limiting coverage for multiple locations. Before TDI can approve anti-stacking language, the company must provide appropriate rate consideration and rate analysis.

10 Other Arguments Contrary to public policy as with escape clause other insurance clauses Hardware Dealers Mut. Fire Ins. Co. v. Farmers Ins. Exchange, 444 S.W.2d 583, 586 (Tex. 1969). Two policies covering same insured Both escaped liability if other insurance Found repugnant Illusory coverage Arbitrary deprivation of benefits of premiums paid

11 False Claim Act Coverage False Claims Act ( FCA ), 31 U.S.C. sections Can find avenues of coverage through some special form professional liability coverages. Must buy specialty coverage in most cases

12 Timing Is Everything Retro Dates, Claims-made, Notice, Prior Pending Litigation, Related or Interrelated Claims, and Many Other Things That Kill Coverage

13 Retro Dates Trigger claim made and reported in the policy period Generally, the date of malpractice or injury is irrelevant. But, most policies include a retro date Any wrongful act prior to that date is not covered even if the claim is made during the policy period Typically, initial retro dates go the inception date of the policy. So, if you change professional liability carriers, you must avoid a gap. The retro date will be the date of the new policy. Thus, both the tortious act and the claim must be made in the same twelve month period, which is rare.

14 Prior Pending Proceedings Exclusion Pending or Prior Proceedings based upon, arising from or in consequence of any written demand, suit or other proceeding pending against, or order, decree or judgment entered for or against any Insured, on or prior to the applicable Pending or Prior Proceedings Date set forth in Item 5 of the D&O Declarations, or the same or substantially the same fact, circumstance or situation underlying or alleged therein. Often includes a broad clause including interrelated acts in the exclusion. Can be a devastating exclusion that leaves very little coverage

15 Claims Versus Circumstances Claim Client makes demand for money or other legal relief Suit is filed Caveat some policies define it broadly: "[A]ny written notice received by an Insured that any person or entity intends to hold an Insured responsible for a Wrongful Act or Occurrence." Knowledge of circumstances by the insured that would lead a reasonable person to believe a claim might be made If in doubt, give notice.

16 Medical Liability Improvement Act Notice Letters (d) of the Texas Civil Practice and Remedies Code No demand for money Request for medical records Requires notice of claim "(a) Any person or his authorized agent asserting a health care liability claim shall give written notice of such claim by certified mail, return receipt requested, to each physician or health care provider against whom such claim is being made at least 60 days before the filing of a suit in any court of this state based upon a health care liability claim. The notice must be accompanied by the authorization form for release of protected health information as required under Section "

17 Notice Letters Notice to the recipient or addressee Not notice to all insureds Notice of the liability event is not notice of a claim TMLT v. Transportation Ins., 143 SW3d 335 (Tex.App. Dallas 2004) Notice letter to doctor was a claim as to him Separate policies issued to the doctor and the clinic Letter was not a claim as to the clinic in which the same doctor was an officer. No coverage for the clinic

18 Rescission/Misrepresentation Applications ask about knowledge of "circumstances" that might lead to a claim Failure to disclose can result in a claim of fraud in the application Rescission not necessarily a defense to the duty to defend

19 Change In Insured/Entity Asset Sales, Mergers and Acquisitions and the Troubles They Can Cause

20 Names Two key defenses Insured named is not the insured sued The insurance policy cannot be assigned with the consent of the carrier Even a corporate conversion with no change in entity requires consent Texas cases Ford Bacon Keller Foundation Other jurisdictions Insurance follows the liability Not in Texas

21 Combining Coverage of Oldco and Newco Provision of separate, higher limits for acquiring insured New insured with lesser limits for acts that occurred before the purchase of the entity Limits depend on whether the acts were pre-sale or not Carrier argued smaller limits applied because some bad acts occurred pre-sale and all others involved interrelated acts. Interrelated acts were deemed to start with the first act. So, mixed claims got lower limits

22 Package Policies

23 Business Packages Health Care D&O EPLI Fiduciary Liability Misc. Professional Liability Internet Liability Crim Non-Liability D&O Can include Health care fraud and abuse claims HIPAA fines and penalties EMTALA fines and penalties IRC fines and penalties Usually done with "sub-limits."

24 Health Care Fraud Claims Most policies cover "suits" Most government investigations involve subpoenas which may not involve a suit. Most are criminal Could be a public policy issue getting coverage Health Care Fraud and Abuse Coverage Defines HCF claim to include all types of proceedings, including warrants and subpoenas. Includes coverage for qui tam etc. Also including claims seeking restitution or other equitable relief

25 Health Care Fraud and Abuse Coverage Insured has the duty to defend No settlement without carrier consent Capped amount of fees typically inadequate

26 EPLI Coverage Limited for Wage and Hour Claims (FLSA) "Wage and Hour Claim" means: (a) a written demand for monetary or nonmonetary relief; (b) a civil proceeding... ; (c) an arbitration proceeding; or (d) a formal administrative or regulatory proceeding or tribunal proceeding, commenced by the filing of a notice of charges, formal investigative order or similar document; which is brought and maintained by or on behalf of any past, present or prospective Employee or Independent Contractor, against any Insured for a Wage and Hour Violation... ; or (2) a written request received by an Insured to toll or waive a statute of limitations, relating to a potential Wage and Hour Claim.... Often subject to a retention Can purchase "defense" coverage Capped at $100,000 or $500,000 May tie coverage to a retro date Broader coverage available, including back wages, fines, etc. through Bermuda and London markets

27 Pending Hot Issues

28 Pending Patterson Is an offer releasing only one of multiple insureds inadequate to satisfy Stowers? Yorkshire v. Segers Are the Gandy requirements for a fully adversarial trial still valid? Independent counsel Is a reserved coverage conflict where the defense will involve facts pertinent to the coverage defense enough to require provision of independent counsel?