Your Insurance Policy – Tips and Tricks

We recognize that the social work profession is a noble one, founded on service, integrity, and clinical expertise. It is stressful—and becoming increasingly dangerous. Thank you for what you do!

As a licensed insurance agent, the author offers important insurance insights and guidance regarding the purchase of an insurance policy. Advice about insurance should only be provided by licensed insurance agents pursuant to the National Association of Insurance Commissioners’ State Producer Licensing Model Act, under which each state requires anyone who sells, solicits, or negotiates insurance to hold a valid insurance license. Insurance is a highly regulated industry, and only licensed agents are permitted to provide advice regarding the purchase of insurance. This is why insurance agents are required to complete substantial continuing education requirements and examinations every two years. They are also reviewed by their licensing state upon license renewal or when applying for a new license, including a review of criminal history and background.

Pro-Tip

Read your insurance policy contract thoroughly and interpret its meaning carefully. Consider what you read in this article as a warning against misinterpreting insurance policy language. It is easy to overlook the nuances of an insurance policy without the guidance of a licensed insurance agent.

An insurance policy is a contract between you, the insured, and the insurance company (or carrier). Pay very close attention to the precise wording of the policy contract, including cross-references embedded throughout the language, and never assume anything. Interpret only what is explicitly written in the policy language. Period.

In exchange for the premium you pay, the insurance company agrees to assume specific, stated risks on your behalf. These risks are ultimately reflected over time through actuarially measured incidents, risk exposures, and claims losses. Claims may involve relatively simple matters, such as subpoenas or state licensing board complaints requiring legal defense, or much more serious issues, such as lawsuits that require extensive legal representation, mediation, and potentially a trial.

The precise policy language serves as a firewall that helps the insurance carrier manage its claims exposure while protecting you for covered incidents outlined in the policy. It is critical to identify any gaps or weaknesses in your policy contract and understand your potential financial exposure.

A professional liability insurance policy is a strict legal contract that typically ranges from 25 to 40 pages and can be difficult to understand. Many policies include endorsements that provide additional coverage, allowing you to transfer more risk to the insurance carrier in exchange for an additional premium.

Embedded throughout the policy and its endorsements is carefully drafted language that defines the risks transferred from you to the insurance carrier, along with limits, sub-limits, aggregate limits, exclusions, deductibles, combined limits, and many other defined terms.

Pro-Tip

When reading your insurance policy, imagine future treatment scenarios within your practice. Ask yourself:

• Could this situation happen?
• If it does, how could I be harmed?
• If I approach treatment differently, what could happen?
• Am I covered for that situation, or am I exposed?
• What action could my state licensing board take against me?
• Could I lose my license to practice?
• What could a client sue me for?
• Do I have sufficient control over my contractors?
• What exposure gaps exist between my management responsibilities and my contractor’s documentation that could pull me into litigation under vicarious liability?

Plaintiffs’ attorneys routinely allege poor documentation and inadequate supervision in malpractice lawsuits. They cast a wide net when making allegations. Be prepared to defend yourself with complete and accurate documentation.

Insurance companies typically transfer a portion of their risk to reinsurance companies through agreements known as treaties. Investors—including specialized insurance investors, institutional investors, private funds, corporate entities, and insurance experts—pool their capital to underwrite and assume portions of these risks. These investors, often referred to as syndicate members, share both the risk and the reinsurance premium.

These treaties are typically bespoke agreements with specialized characteristics tailored to specific risks. Lloyd’s of London and Swiss Re are two of the largest reinsurers in the industry. Through negotiation, reinsurers retain portions of the risk using creatively structured horizontal layers, vertical layers, or combinations of both, depending on the type and amount of risk being reinsured. When policy limits and exposures are relatively low, the insurance company may retain all of the risk, depending on the frequency and severity of anticipated claims.

In addition to understanding the base premium—which is based on occupational class, covered perils, and per-occurrence and aggregate limits—carefully review your policy to understand the exclusions, sub-limits, combined limits, and deductibles. These provisions, along with many others, are tools insurance companies use to manage claims exposure and preserve underwriting profitability. Simply put, they may shift portions of the financial risk back to you.

Pro-Tip

Beware of excessive fees if an insurance agency charges policy fees, administrative fees, or similar charges. Some insurance companies and agencies assess these fees when selling policies directly to consumers. These fees represent additional income beyond the insurance premium.

For example, if a claims-made professional liability policy has a first-year premium of $50, a $5 policy fee increases your cost by an additional 10%.

The exclusions section is one of the most important parts of any insurance policy. You may believe you are covered for certain situations when purchasing the policy, only to discover later that an important coverage has been excluded or limited by a sub-limit.

For example, this commonly occurs with marital counseling, divorce-related matters, treatment involving minors, and child custody cases. These situations are emotionally charged, carry significant legal implications, and often result in higher claims losses.

This is especially important when renewing your policy because insurance companies frequently revise policy language after experiencing significant claims activity. They may reduce sub-limits or eliminate coverage for specific exposures altogether.

Insurance carriers are legally required to notify policyholders of material changes in coverage. However, it is ultimately your responsibility to determine whether those changes are acceptable or whether you should seek coverage from another insurance company.

Pro-Tip

One final word: Do not rely solely on your employer’s insurance policy to protect you. Your employer is the first named insured under the policy—not you. There may be significant gaps in coverage that leave you personally exposed.

When purchasing your own professional liability insurance policy, consider adding state licensing board defense coverage. Your ability to earn a living depends upon maintaining your professional license.

We also recommend purchasing a general liability policy, which can provide protection for liability arising both inside and outside your office.

In addition, consider purchasing cyber liability insurance that provides coverage for third-party data breaches involving client information. Such coverage can help address liabilities arising under federal privacy laws, including HIPAA and the HITECH Act (45 CFR Part 160 and related regulations).

In closing, study your insurance policy carefully. Insurance policies can be like hospital gowns…you may not always be covered.