The Case for Group Malpractice Insurance for Dental Practices
In recent years, the landscape of dental malpractice claims has undergone notable shifts. While the frequency of claims has remained relatively stable, the severity of these claims has shown a significant increase. This trend can be attributed to various factors, including third-party liability funding for lawsuits by private equity firms and the phenomenon of social inflation among juries.
Despite the consistent frequency of claims, dental practices are increasingly facing larger settlements and verdicts, placing greater financial strain on practitioners and corporate entities alike. Third-party funding, often employed by private equity firms, injects additional resources into malpractice lawsuits, enabling claimants to pursue higher damages. Furthermore, social inflation, characterized by increasing jury sympathy toward claimants and a tendency to award larger verdicts, has contributed to the escalation of claim severity.
In this challenging environment, the importance of robust malpractice insurance coverage cannot be overstated. Dental group practices and dental support organizations (DSOs) must proactively safeguard themselves against the financial risks posed by these trends. Group malpractice insurance emerges as a vital tool in this endeavor, offering comprehensive protection tailored to the unique needs of DSOs.
Attorneys tend to pursue cases with the deepest pockets, and in DSO situations, it is often the entity rather than the individual provider that becomes the target of legal action. This logic underscores the necessity for DSOs to ensure adequate insurance coverage at the organizational level to mitigate the risk of substantial financial losses.
Now, let’s delve into the benefits and considerations surrounding group malpractice insurance, exploring how it can mitigate the impact of rising claim severity while providing peace of mind to practitioners and corporate entities alike.
Why Group Malpractice Insurance?
The decision to opt for a group malpractice insurance plan depends on several factors, including practice size, the number of dentists involved, and specific establishment needs. Generally, dental practices with two or more locations and/or ten or more providers may find a group malpractice plan more practical compared to individual coverage for each provider.
Benefits of Group Malpractice Insurance
Assurance of coverage: Employment contracts may stipulate the type of insurance each associate should carry, but it doesn’t guarantee that providers purchase and maintain adequate coverage. Failure to maintain coverage could lead to claims against the entity, as illustrated by a case where a provider canceled their policy after obtaining proof of coverage, resulting in a significant claim against the corporate entity and increased renewal rates.
Broker story: We had a client with five locations that required each provider to have their own coverage. One dentist annually bought a policy, showed proof to the credentialing department, and then canceled the policy a month later. When a claim was filed against them, they realized they were not maintaining coverage. Consequently, the corporate entity policy settled the claim, but it affected their renewal rates by 35%.
Administrative efficiency: Managing individual malpractice policies for each dentist within a practice can be a time-consuming administrative task. Group plans streamline this process by consolidating coverage under a single policy, simplifying renewal, billing, and reducing paperwork.
Broker story: We once had a client with over 100 providers, each carrying their own coverage. Since they all had different renewal dates, their credentialing team estimated it took on average 20 minutes per dentist to contact each one, follow up, and track down each certificate. It was a huge waste of resources.
Consistent coverage and avoidance of finger-pointing: Group malpractice plans ensure uniform coverage for all practitioners, eliminating confusion and disputes between insurance carriers in situations involving multiple practitioners in patient care. This prevents situations where carriers blame each other, leading to increased costs for the corporate entity.
Broker story: We had a ten-location practice where half of the individual providers were insured by Carrier A, and the other half by Carrier B. When a patient filed suit for a missed diagnosis involving visits to both carriers, instead of presenting a unified front, each carrier paid out separately, and the corporate entity had to cover additional costs.
First named insured: consent to settle: As the first named insured, the corporation holds essential rights, including consent to settle claims. This prevents individual dentists from making unilateral decisions that could impact the entity’s interests.
Broker story: A twenty-location client of ours faced a lawsuit where the demand was $50k, and the practice wished to settle to avoid trial and negative PR. However, the dentist involved insisted on not settling, claiming innocence. As the provider was the first named insured and the group was only an additional insured, they were unable to make the decision.
Potential cost savings: Group malpractice plans often offer cost advantages, such as lower premiums due to collective purchasing power, particularly for large groups.
Broker story: Some of our very large group clients choose to have a high self-retention level or even have a partial fronting arrangement in place. This allows them to greatly benefit from their exemplary risk management and clinical training. However, for these additional savings, they take on a greater portion of the risk.
Tailored Coverage for Comprehensive Protection
Group malpractice plans can be customized to address specific needs and risks of dental practices. Tailored provisions may include:
Pre-paid ERP (extended reporting period) endorsement: Provides prior acts coverage to attract and retain mature dentists and eliminates the need for tail coverage upon associate departures.
Broker story: Many of our clients use this endorsement to attract and retain mature dentists by offering prior acts coverage and reduce the need to track down tail coverage when a provider leaves the practice.
Location-specific policy restriction endorsement for associate dentists: Limits coverage to designated offices, reducing risks associated with external moonlighting activities.
Extended entity limits for the corporation: Establishes separate coverage limits for the corporate entity, protecting its interests independently from individual dentists.
Broker story: While $1 million per occurrence is the standard limit for an individual, the rise in the severity of claims has led to verdicts above this amount. When a verdict above the policy limits was awarded, it was our DSO client entity that was pursued for the additional payment, not the individual dentist.
Vicarious liability endorsement: Extends coverage for non-scheduled dentists, shielding the organization from legal and financial repercussions related to their actions.
Broker story: Many clients use these to protect themselves from contractor specialists, such as oral surgeons or periodontists who are not directly employed.
If the arguments for group malpractice insurance haven’t convinced your group practice/DSO, we highly recommend at least obtaining a corporate entity malpractice policy. This offers protection to the entity, even if individual dentists lack sufficient coverage.
Ready to safeguard your dental practice against the evolving landscape of malpractice claims? Dentist Insurance Services is here to help. With competitive rates on worker’s compensation policies tailored specifically for dental professionals, we ensure comprehensive coverage to protect your practice and your team.
For questions about group malpractice policies email carrie@joindis.com or call/text (850) 681-2996 Carrie Millar. To get a quote on coverage visit our website at dentistinsuranceservices.com/group-malpractice