Asset Protection: Insurance Issues Most Doctors Overlook

January 24, 2017

Always make sure you are covered for various liability insurance blind spots before they become an issue.

While most doctors are aware of their malpractice risk and are at least partially insured against it, there are many other legal risks related to running a medical practice that they overlook. Here are some other vital risks to be aware of and manage before they become a crisis.

In our first discussion of this year, I provided some asset protection New Year's resolutions for doctors, including resolving to manage as many identifiable risks as possible when it is cheapest and most predictable to do so.  Here's a list of doctors' most common liability insurance blind spots; we will provide further detail on each one in future discussions.  

Employee Lawsuits:

One of three vital steps to protect your medical practice from the very common exposure of an employment related lawsuit is to have Employment Practices Liability Insurance or EPLI. As an employer, you are responsible for not only your own interactions and compliance with employment law, but for everything employees do with the public and each other. I recommend having at least $1 million in coverage in this area, as legal defense costs alone can be six figures, as are many awards.

Data Breach/Cyber Liability

The exposure of either HIPAA protected or PII (patient identifying information) is a both a significant legal liability and PR nightmare. All medical practices should be adequately insured against all forms of this exposure including; hacking, loss or theft of devices with sensitive information and intentional theft by employees. Many doctors we speak with have somewhere between $0 and $50K in coverage as part of another policy, which is shockingly inadequate. Again, shoot for seven figures in coverage.

RAC Audit Insurance

The Recovery Audit Contractor program also known as a "RAC Audit" seeks to identify and eliminate fraud and waste in Medicare payments. While some audits are routine and require only minor corrections, others are much more serious requiring civil and even criminal legal defense, crippling levels of document production (they can request new files every 45 days), and forensic review. A controversy during this process can also, in the worst cases, interrupt your receivables as provider and even cause your existing accounts and funds to be seized.

Director's and Officer's Liability Insurance (a.k.a. D&O Insurance)

Just like any other business owner or executive, physician practice owners and managers have significant personal liability for their acts, omissions, and compliance as owners, directors, officers, etc. of a corporation. This is separate and distinct from your malpractice coverage and is regardless of the title you hold or perhaps don't hold. If it's your practice and you are the actual authority, the liability is yours. Again we suggest mid-six to seven figures in this coverage area as well. You should also have this coverage from every board of a corporation, foundation, school, religious institution etc. you have a position with.

Disability Overhead Insurance

You may have personal disability insurance that replaces some of your personal income if you are disabled, but what about the cash flow you and other key employees or partners generate for your business? How long would the practice be solvent and stay open without it? You should know who produces what dollars in your practice and be realistically insured if yourself or another key producer can't work for some period of time so that your practice remains solvent and to avoid having to going into your savings (or worse, into debt) to keep it open. This distinct coverage, referred to as Disability Overhead Insurance does just that and should be adequate to cover all the fixed monthly expenses your production covers.

Key Person Disability Insurance

Closely related to the coverage above is coverage for the loss or incapacity of key employees who either are themselves big producers or perform vital functions that allow you to do so. This insurance benefit helps cover any temporary income loss and the costs or locating, recruiting, and training a suitable replacement.

Premium costs vary with the size of your organization and your individual underwriting and claim history, but in my experience getting all the coverage above costs less than just the retainer to get a lawyer to start to defend you against any one of these exposures. Dollar for dollar it's some of the best defense available for your wealth and practice. Review this list with an experienced commercial insurance agent for help today so that you are covered for the rest of the year.