Limits of Liability

OMIC’s latest claims data indicate that the number of medical professional liability (MPL) claims made against ophthalmologists is slightly increasing; and, since 2016, the dollar amount of awards has also risen. Insureds may wonder if their current limits of liability are appropriate in this environment. This article addresses what limits of liability are, considerations for selecting them, and how changing them affects coverage if claims arise.

Your per claim limit of liability is the maximum amount of damages OMIC will pay on your behalf as a result of a covered claim. Damages, sometimes referred to as “indemnity,” means the money paid as compensation to someone bringing a claim against you. This amount may be awarded in a lawsuit or arbitration, or agreed to in a settlement between the parties. OMIC pays your defense costs in addition to your liability limits.

You also have an aggregate limit. This is the maximum amount OMIC will pay per insured for all claims made and reported during the policy period (generally one year). This is often two or three times the per claim limit.

There are several factors to consider when selecting limits of liability. Your state’s laws may influence what limits you carry. Some states have medical liability damage caps (the maximum amount a plaintiff can recover in a malpractice lawsuit). Physicians may want to insure their total exposure under the cap. For example, in Virginia this cap increases incrementally each year, and OMIC offers corresponding limits. Your state may have a patient compensation fund (PCF) with voluntary or mandatory participation. Laws in these states establish minimum liability limits doctors must carry. Often, the minimum limits are low since the PCF will pay all or some of any additional indemnity owed. Hospitals where you have privileges may also specify the minimum limits you must carry.

Claims statistics and risk relativity provide additional helpful information. For example, as of 4/15/2019, OMIC’s average indemnity payment was $180,500 and OMIC’s largest indemnity payment was $3.375 million. Because of the relatively small number of indemnity payments made by OMIC on behalf of its insureds, it is difficult to make a statistically significant determination of the states with the highest severity. However, the following states with at least 50 current insureds have at least two of the following three characteristics – indemnity paid on one policy of $1 million or more; average indemnity over $260,000; and at least one plaintiff verdict: Alabama, Arizona, Connecticut, Florida, Illinois, Massachusetts, South Carolina, and Virginia.

You may want to consider the liability limits your peers are carrying. Most OMIC insureds (60%) carry $1 million per claim/$3 million aggregate limits. 31% of insureds carry higher limits: 24% carry $2-2.2 million per claim, 3% carry $3 million per claim; and 4% carry $5 million per claim. 9% of insureds carry less than $1 million/$3 million limits: 7% carry OMIC’s lowest generally offered limits of $500,000/$1.5 million, and 2% have other lower limits due to PCF participation.

You should assess the risks specifically related to your practice. Does your subspecialty experience high claims frequency (e.g., comprehensive/cataract) or large damage awards (e.g., pediatric)? Do you share your coverage and limits with any employees or your medical entity? Have you ceased performing most surgical procedures and/or practice only part-time?

Finally, assess your level of risk aversion. Often, plaintiff attorneys will not seek more than the insured’s limit of liability in damages for their clients. The higher the limits you carry, the more they may demand. Would you be worried about having such “deep pockets,” or would a larger indemnity cushion make you feel more secure?

Changing your limits will affect the limits available to pay future claims. The limits of liability that apply to a claim are those that are in effect as of the date the claim (or potential claim) is reported in writing to OMIC. In other words, if you increase or decrease your coverage after an incident occurs but before you report the claim, the new limits, not the limits that you carried when the incident occurred, will apply. However, note that any increase or decrease to your limits is subject to underwriting approval. Your claims history will be taken into account and you will need to confirm that you are not aware of any claims or potential claims that you have not already reported to OMIC.

Note that OMIC has certain limits requirements when practicing in a group. Your OMIC underwriter is available to discuss your limits options with you. However, they are not in the position to offer you advice; if needed, you should consult your personal attorney.

This explanation is intended to give you an overview of what damages are covered within your policy limits, what supplementary payments are available, and which sums are not covered by your policy. It does not address the additional benefits for disciplinary and regulatory proceedings and cyber liability that are also provided by your policy. For all terms, conditions, and exclusions of your policy, please reference your policy booklet.