Insurance. Professional UabilitM Commercial & Other. Professional Uability Insurance. AnAbsolute Necessity

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1 Prfessinal UabilitM Cmmercial & Other Insurance AnAbslute Necessity I n August 2005, Illinis enacted medical malpractice refrm that limits the amunt a jury can award fr persnal pain and suffering t $500,000 frm physicians and $1,000,000 fr hspital judgments. 26 This refrm was vitally needed t address, in part, the medical liability crisis facing Illinis. Illinis healthcare prviders still face staggering premium rates that have, unfrtunately, frced many physicians in specialties such as neursurgery, rthpedics, anesthesilgy, general surgery and bstetrics/gyneclgy t either leave the state r t abandn perfrming high-risk prcedures. Althugh prfessinal liability insurance is expensive, it is still a vital necessity fr individual physicians and their grup practices. As imprtant t grup practices, hwever, is cmmercial liability insurance t prtect the practice and its wners frm claims related t its rles as landlrds and emplyers. Prfessinal Uability Insurance OCCURRENCE VERSUS CLAIMS MADE POUCIES Plicies can be written as "ccurrence" r "claims-made" cverage. Occurrence cverage cvers the insured fr incidents ccurring during the perid f time when the insurance is maintained. Prvided the insurance plicy is paid up and in effect at the time a negligent act r missin ccurs, the plicy will prvide cverage. Upn the terminatin f the plicy, r if the plicy lapses, the insured will still be cvered fr claims brught after the plicy perid, as lng as the claims relate t incidents ccurring during the perid f cverage ROBBINS, SALOMON & P ATI, LID.

2 Claims-made prtectin is liability insurance that prvides cverage fr claims relating t incidents ccurring during the plicy perid nly if such claims are brught during the plicy perid r ntice f the prspective claim was prvided t the insurance carrier during the plicy perid. Insurance cverage typically ceases with the terminatin f the claims-made plicy, althugh certain plicies prvide grace perids, typically 30 t 60 days after the insurance plicy has terminated, t permit the insured t submit and cver claims after the end f the cverage perid. Withut a grace perid, mst claims made n r after the plicy terminatin date are nt cvered. REPImNG ENDORSEIIIENT (-rail COVERAGE ") T extend insurance cverage f a claims-made plicy with its current insurer, "tail cverage" is available. Tail cverage will extend the perid f time cverage is prvided fr claims arising ut f events that ccurred while the riginal, claimsmade insurance plicy was in effect. Tail cverage fills the gaps that may ccur between the effective dates f separate plicies. Tail cverage premiums are expensive. They are typically 150% t 250% (r higher) f the annual premium f a claims-made plicy. COVERAGE AMUNTS In Illinis, there are n statutry rmrumum requirements fr the amunt f prfessinal liability insurance cverage a physician must have. Plicies are written in Illinis with limits f: $ 500,000 per ccurrence/$1,500,000 aggregate $1,000,000 per ccurrence/$3,000,000 aggregate $2,000,000 per ccurrence/$4,000,000 aggregate With $1,000,000 per ccurrence/$3,000,000 aggregate being the mst cmmn. GROUP POUCIES A grup practice typically requires a plicy specific t the grup, which will prvide cverage fr all f its physician wners and physician emplyees fr malpractice claims arising ut f the scpe f their emplyment. In cntrast, fr a sle practitiner cverage fr the entity is typically autmatically included under the physician's individual prfessinal liability plicy ROBBINS, SALOMON & P ATI, LID.

3 Cmmercial Insurance er.wl!rclal AND GENERAL LIABILn'Y INSURANCE Large grup practices typically btain cmprehensive general liability insurance. Cmprehensive general liability insurance (als knwn as "general liability insurance") prvides brad, cmprehensive insurance cverage and generally applies t all business activ1ties f the insured (except fr specialized activities such as malpractice, business risk, wrkers cmpensatin and autmbile insurance). General liability insurance prvides standardized cverage t include insurance fr accidental injury r prperty damage t a third party resulting frm the peratins perfrmed by the insured n its premises, accidental injury r prperty damage that may result frm the wnership r peratin f the insured's premises itself, and insurance fr claims arising frm incidental cntracts entered int by the insured. Small and mid-sized grup practices may btain a business wners plicy (''BOP''). A BOP bundles prtectin frm all majr prperty and liability risks in ne package (except fr specialized activities such as malpractice, wrkers' cmpensatin and autmbile insurance). BOP cverage includes prperty insurance fr buildings and cntents, business interruptin insurance and liability prtectin. Directrs & Officers Insurance Directrs and fficers f a grup practice structured as a crpratin r limited liability entity are charged with fiduciary duties t the crpratin r entity in cnnectin with the perfrmance f their duties. Illinis law allws a prfessinal services crpratin, medical crpratin r limited liability entity t indemnify its directrs and fficers frm claims by third parties when they act in their crprate capacity. A directrs and fficers insurance plicy (cmmnly referred t as a "D & 0 Plicy") prvides cverage fr a crpratin r limited liability entity t satisfy its indemnificatin bligatins, r prvides cverage fr the directrs and fficers themselves if there is n indemnificatin undertaken by the crpratin r limited liability entity. This type f plicy prvides cverage, nt nly fr lsses incurred by the insured in cnnectin with any litigatin claims, but als fr the cst f defense incurred by the insured ROBBINS, SALOMON & P AIT, LID.

4 Prperty Insurance Prperty insurance cvers lsses arising frm damage t real r persnal prperty wned by the insured. Generally, these plicies are written t insure against "named perils". Thus, if the insured prperty was destryed r damaged by the risks specifically named in the plicy, cverage wuld be available. Typical perils named include: fire, lightning, windstrm, hail, explsins, rits, and civil cmmtin, plus damage caused by autmbiles. In additin, ptinal cverage is generally available t insure against flds, earthquakes, building cllapse and glass breakage. Minimum cverage amunts fr prperty insurance will generally be dictated by the wner f the prperty f the practice lcatin, r by lenders if the practice will acquire its practice lcatin. Wrkers' Cmpensatin Insurance Illinis law requires emplyers t prvide wrkers' cmpensatin cverage fr their emplyees. 27 Sle prprietrs, business partners, and members f limited liability cmpanies may exempt themselves frm this.?8 reqw.rement.- Emplyers may either buy insurance r btain permissin frm the Illinis Wrkers' Cmpensatin Cmmissin t self-insure. By law, Illinis emplyers are required t purchase wrkers' cmpensatin insurance, pst a cnspicuus ntice in each wrkplace that lists the insurance carrier and explains wrkers' rights, keep written recrds f wrk-related injuries and reprt t the cmmissin accidents invlving mre than three wrkdays lst. In additin, emplyers may nt retaliate, harass r discriminate against any emplyee wh exercises their right under the law, and nt charge the emplyee fr any insurance premium the emplyer is bligated t pay. If an emplyer knwingly and willfully fails t btain insurance, it may be fined up t $500 fr every day f nncmpliance, with a maximum fine f $10,000. Crprate fficers can be held persnally liable if the cmpany fails t pay the penalty.29 In additin, crprate fficers wh are fund t have negligently failed t btain insurance are guilty f a Class A misdemeanr; if they are fund t have knwingly failed t btain insurance, they are guilty f a Class 4 felny ROBBINS,SALOMON&PATI,LID.

5 An emplyer that knwingly fails t btain insurance lses its prtectins under the Wrkers' Cmpensatin Act. An emplyee wh is injured during the time the emplyer was uninsured may sue the emplyer in civil curt, where benefits are unlimited. In additin, during the trial the burden will be upn the emplyer t prve it was nt negligent. Fr mre infrmatin visit the Illinis Wrkers' Cmpensatin Cmmissin web site, ROBBINS,SALOMON&PATI,Lm.