The following represents some common terms associated with professional liability insurance policies. Because this is not an all-inclusive list and understanding the specific usage of the terms may be difficult, it is suggested that you contact PMIS with questions you may have.
Claim – A written notice, demand, lawsuit, arbitration proceeding or screening panel in which a demand is made for money or a bill reduction.
Claims-Made Coverage – coverage that provides protection for claims that occur and are reported while the policy is in effect. Also see the definitions for “Retroactive Date” and “Tail Coverage” below.
Claims-Paid Coverage – Under a claims-paid policy, premiums are based only on claims settled during the previous year and projected to be settled in the coming year.
Claims Reserves – Funds set aside to satisfy those claims that have been reported to the company but not yet resolved or paid.
Claim Severity – Refers to the amount of financial liability resulting from resolving a claim.
Incident Date – The date a specific treatment was rendered causing alleged malpractice.
Report Date – The date in which an insurance provider is notified of an actual or potential claim again an insured.
Declaration Page – That portion of a policy providing information such as the insured’s name & address, the policy period, retroactive date (if applicable), deductible (if applicable), the limits of insurance, the policy premium and any endorsements attached to the common policy language.
Deductible – An insured’s financial obligation to a claim’s awarded damages or defense costs.
Domiciled – Refers to the state in which an insurance company receives a license to operate. The company is then regulated by that state’s Department of Insurance.
Earned Premium – The portion of premium that applies to an actual coverage period.
Endorsement – a written amendment to an insurance contract or policy.
Excess Insurance – A separate insurance policy with limits above the primary policy.
Extended Reporting Coverage – See “Tail Coverage.”
Incident – An occurrence that the plaintiff claims has led to culpable injury.
Incurred Losses – Includes both paid and unpaid (reserved) losses.
Indemnity – An insurance company’s payment to a plaintiff in settlement or adjudication of a claim.
Indemnity Reserves – Claims reserves that are set aside to pay the portion of claims costs paid directly to claimants.
Informed Consent – An agreement obtained voluntarily from a patient for the performance of specific medical, surgical or research procedures after the material risks and benefits of these procedures and their alternatives have been fully explained in non-technical terms.
Limit of Liability – The maximum amount an insurer will pay under the terms of an insurance policy.
Locum Tenens – A substitute physician who temporarily takes the place of a named insured policyholder or physician member of a medical group.
Loss Reserves – Amount set aside to pay for reported and unreported claims. For an individual claim, a case reserve or estimate of the expected loss is set aside.
Malpractice or Professional Negligence – the failure to exercise the degree of care used by reasonably careful practitioners of like qualifications in the same or similar circumstances.
Non-Standard Risk – Those persons or entities that do not qualify for standard insurance policies terms & conditions because of factors such as: claims, licensure issues, classification, etc.
Nose Coverage – Nose coverage covers claims first made against the physician after the effective date of coverage on the policy. To be covered, such claims must arise out of the physician’s acts or omissions prior to the policy’s effective date and after its retroactive date.
Occurrence Insurance – a type of policy that obligates the insurance company to pay for claims arising out of incidents during the policy period regardless of when the claim is reported.
Policy – The contract between an insurance company and its insured. The policy defines what the company agrees to cover for what period of time and describes the obligations and responsibilities of the insured.
Retroactive Date – Date after which losses may occur and be covered under a Claims-Made policy.
Risk Management – A systematic approach used to identify, evaluate, and reduce or eliminate the possibility of an unfavorable deviation from the expected outcome of medical treatment, and thus prevent the injury of patients due to negligence and the loss of financial assets resulting from such injury.
Standard Risk – A person or entity who is eligible for insurance coverage with an admitted insurance provider based upon that insurer’s pre-established underwriting rules and guidelines.
Tail Coverage – supplemental insurance that covers incidents that occur subsequent to the retroactive date shown on an insured policy through the policy’s termination. Tail coverage is most often purchased from an insured’s previous claims-made carrier and may cost in excess of 250% of the prior year’s premium. Certain insurance providers may grant an insured free Tail Coverage to those insureds who die, become permanently disability or permanently retirement from the practice of medicine.
Unearned Premium – That portion of a premium that is paid in advance of a coverage period.
Vicarious Liability – Liability for the acts of someone else.