August 1999 Bulletin

How to select carrier that won't vanish

Tests will guage if insurer has good track record, strong finances, risk management program

By K. Mason Howard, MD

The Committee on Professional Liability is aware that members in some locations have been placed in a precarious position because the carrier providing their coverage abruptly left the market or was put out of business by state regulators. Such an event may place the orthopaedist in a position without insurance coverage, without any defense in new or established claims against them and with potentially huge exposure to their personal assets in the event of judgments or awards.

The committee has assembled the following list of tests you can apply, questions you can ask, in order to gain the best possible assurance that such a disaster will not befall you in the future. We suggest you consider your present and/or future coverage against these criteria.

Word of mouth

What coverage do your colleagues have? Why have they chosen a particular company, and for what period of time have they been so insured? In the event of claims or suits, have they been satisfied with the company's service? What is the track record of the company in defending claims against their insured physicians? What can you learn regarding the defense lawyers used by the company-do they have good track records, undertake defense seriously, etc.?

Association recommendations

In many locations, medical or professional associations will have an officially sponsored company which is recommended. This may well not be the only option available, but usually bespeaks a "physician friendly" liability company.

State insurance department

All state insurance departments can provide you with information on a carrier doing business in that state-information such as solvency measures, market conduct evaluations, ongoing problems requiring state intervention, etc. Most state insurance departments are stressing consumer-friendly assistance when you call, and will gladly answer your questions.

Rating agencies

Several companies rate the quality and strength of insurers, most notably A. M. Best, Standard & Poor's, and Weiss Insurance Ratings. This information should be readily provided by the company you are considering, and interpreted for you if the information sounds less than favorable. (An Ohio company recently closed down by the state had declining and inferior Best ratings for some time, a message which should have suggested action if known by policyholders.)

Risk management

Does the company have an active program in place to assist you in avoiding claims and suits, a real risk management program? Companies that actively manage risk before the fact have a proven, superior record to those that have no such programs.

Policy language

Look especially for the policy verbiage dealing with the right to settle claims or lawsuits. Ideally, you should retain the right to make decisions regarding defense or settlement of claims, but some companies retain that prerogative for themselves. Such defend- vs. settle-decisions always involve lots of give and take between the company and insured doctor, but the final decision should be yours.

Coverage available

Check the per claim and aggregate policy limits which are available. If you want a policy with $5 million per claim and $5 million aggregate coverage, be sure the company offers just such policy limits.

Tail coverage

Most professional liability policies are currently written on a claims-made form, under which coverage ends when the policy period expires-at the end of each policy year, when you change carriers or when you retire. Question the availability, price, insurance limits and duration of coverage you will need when you do leave any carrier providing claims-made policies.


While your first inclination may be to compare two or more companies on the basis of your cost, perhaps this is the least important consideration. If you buy a policy the price of which is "too good to be true," that's probably exactly what you are getting. Responsible insurers may compete on price within a narrow range, but at the end of the day they will price their product such that the premium collected is sufficient to pay the claims and expenses which arise in the future.

K. Mason Howard, MD, is a member of the Committee on Professional Liability

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