Issue 5 - April 2003

FINANCE & TAXES BY MARK BATTERSBY
Insuring against ‘oops!’

Chiropractic has been lucky. It has not been hit with the skyrocketing malpractice insurance premiums the medical community has experienced. Nevertheless, insurance premiums have risen. And that serves as a wake-up call and raises the question: How protected from liabilities are you and your chiropractic practice?

Liability insurance
Every chiropractic practice needs several types of liability insurance, available from your friendly insurance agent or broker:

• General liability insurance. If you permit a hazard to exist – such as failing to remove ice and snow from your sidewalk – you are negligent. General liability insurance protects any practice or business against claims made for bodily injury or property damage to a third party, for medical expenses accruing to the underlying incident, for the cost of defending lawsuits, including investigations and settlements as well as for any bonds or judgments required using an appeal procedure.

• Workers' compensation. This insurance is probably the best known liability insurance. Required by law in all 50 states, workers' compensation insurance protects an employer from liability for an accident involving an employee. This type of insurance pays medical expenses and lost wages for an injured employee and, in cases of death or disability, provides lump sums or annuities.

• Premises and operations. This is part of a business liability policy that covers a chiropractic practice for bodily injury or property damage liability to members of the public while they are on your business premises.

When professionals hold themselves out to the general public as having expertise in their field greater than the average layman, they create a liability. Today, lawsuits are frequently brought alleging that a professional, such as a physician, attorney, C.P.A. or chiropractor has committed negligent acts or omissions in performing the purchased services.

• Professional liability insurance. Of all the suits that could be brought against professionals, the two most common are for breach of contract and negligence in the performance of services.

Negligence suits are more frequently made. They arise from damages sustained due to the professional's failure to perform according to known standards of conduct within their field. Naturally, there must also be a close relationship between the negligent acts and the damage that they cause.

The financial consequences of such suits, including the cost of defending them, can be severe. As a result, it is critical that all chiropractors recognize their exposure to financial losses and adopt effective means to deal with them.

• Errors and omissions policy. This may be part of your professional malpractice insurance. Errors and omissions liability insurance protect against negligent acts and/or omissions resulting in bodily injury, personal injury and/or property damage liability to a client.

Cost of insurance
How much any chiropractor or practice will pay for insurance, the premium, is typically based on a number of factors such as: your profession, the number of professionals covered, annual revenues, location of the practice, the limit of liability and the deductible. Obviously, every chiropractor and chiropractic practice would be well advised to shop carefully for protection.

The “insured” in many professional liability policies includes the covered practice itself as well as its past and present partners, directors, officers and employees while acting within the scope of their duties. The policies include coverage for defense costs, even if a suit proves to have no merit.

How much do you need?
You want to purchase the right amount of insurance. Too little – for example, carrying only the minimum amount of liability insurance that is required in your state – leaves you vulnerable. Too much – paying for protection that is covered in other ways, for example – is wasteful.

Work with a reputable agent or broker to determine your needs, taking into consideration legal minimums set by law or licensing boards; the structure of your business (an incorporation may incur lower premiums); and your employees (less experienced employees may expose you to more risks).

Managing risk
Establish and maintain a loss- prevention program that will help minimize the chances of malpractice claims being brought in the first place. Consider these common loss-prevention techniques that minimize your exposure to risk (and, often reduce the cost of insurance protection):

• Establish the fees and/or billing practices at the beginning of every patient relationship;
• Use engagement letters, contracts and other means to precisely identify the scope of the services to be performed;
• Keep written documentation of all activity, including telephone calls, billing calculations, etc.;
• Where feasible, participate in peer reviews;
• Avoid situations that present conflicts of interest;
• Obtain appropriate credentials and certification and take continuing education courses to remain current regarding developments within your profession;
• Screen new patients carefully and keep existing patients informed at all times;
• Avoid giving specific warranties and similar performance guarantees.

In today's litigious society, liability insurance is a necessity. How readily available and at what cost require shopping. Remember, however, that professional liability insurance, like most other insurance, doesn't cost – it pays.

Mark E. Battersby is a tax and financial advisor, freelance writer, lecturer and author with offices in suburban Philadelphia. He can be contacted at 610-789-2480.