Asset protection and risk management for doctors go hand in hand and take many forms. This week, we examine five real risks from recent headlines that you may not have considered and that can’t all be addressed by medical malpractice insurance alone.
Our last few discussions started an ongoing series on risk management that included a self-exam of the adequacy of your current core personal and business planning and then looked at specific risks that ranged from ID theft and prenuptial agreements to employment lawsuits and the dangers of owning your personal car through your medical practice.
Board Member Liability Outside the Office
I’ve previously covered the need for physicians and practice leaders to consider Directors and Officersinsurance coverage or “D&O” coverage as it is commonly known. This D&O insurance covers managerial malpractice issues that aren’t covered by other policies including your medical malpractice and general liability policies and is also vital protection for your service on other boards including hospital, school, business and even homeowners’ associations (HOAs). All of these organizations should carry D&O insurance to protect their board members and it should be an expense that the organization bears, not you the board member.
As one upscale gated lakeside community in Gilbert, Arizona recently discovered, things can quickly get out of hand quickly when a (common) dispute about how board members were spending homeowners association (HOA) funds was aired on social media by home owners. The HOA responded by demanding retractions, imposing fines of $250 a day and threatening to impose a draconian “social media policy” on its residents that barred any unflattering comments about the board or the community. This all lead to threats of various suits and countersuits from all parties and both local and national media attention that, you guessed it, further portrayed all involved in a negative light.
Many physicians live in higher end communities with HOAs and should be aware that service on such boards carries significant personal liability for board members. If you serve on an HOA or any other board, some essential risk management is always the same; get a copy of the “in-force” (current) insurance policy to confirm its existence and limits and make sure you are willing and able to bear the risks of both an award and any costs of legal defense above the policy limits.
What if Your Employer Provided Medical Malpractice Insurance Disappeared?
Asset protection is a series of layers that include risk management, insurance, and legal tools. Insurance is a vital first line of defense against medical malpractice liability and the costs of defense which can easily be six figures on their own. As one group of nearly 1,000 Philadelphia area physicians recently found out, relying on a 3rd party to provide coverage as your only protection could leave you suddenly exposed. As the Wall Street Journal reported, the Hahnemann University Hospital was owned by one healthcare company (Tenet Healthcare) that provided malpractice that included tail insurance that protected its employed physicians from both current and past treatment claims. The hospital was sold and the new owners (AAHS) replaced the coverage with lower priced care that excludes the tail coverage for any claims outside the policy period, before ultimately going bankrupt. This left the physicians both unemployed scrambling for new jobs and having to find and pay for their own tail coverage against past treatment liability at cost that some reports claim is up to $75,000 or face losing their licenses and financial ruin if they faced an uncovered claim.
The doctors and former medical residents estimate that … all together, they could be owed more than $20 million. Rates vary depending on medical specialty and other factors, but some of the … received quotes for the coverage ranging from $5,000 to $75,000. Many of these doctors are still in their post-graduate training or early on in their careers and carry substantial debt from medical school.
This all also left behind a large number of patients and area residents who now have hard feelings about how they were abandoned, which itself creates additional malpractice claim risk. At least one local medical malpractice law firm has an entire page devoted to potential claims against the hospital and its physicians including the historical details of the hospital outlined above.
In part two later this month we will examine other current headlines that illustrate risk factors and the defense strategies required to protect your assets.