Caption Corner Part 3 – The 4 E’s of Insurance

Avoiding Malpractice: Tips for Social Workers to Manage Risk

Caption Corner Part 3 – The 4 E’s of Insurance

As licensed practitioners, there is no doubt that you should have a professional liability insurance policy to cover you for malpractice, a cyber or data breach insurance policy to insure you for HIPAA violations arising from third party information breach, and a general liability insurance policy covering your office, fire perils, bodily injury, and third party property.

This month we will continue to discuss some of the most important liability insurance terms that you need to know.

In Part 1 published in December 2016, we discussed the following:

  • Insurance Agent or Insurance Agency
  • Hazards and Perils
  • Limits and Sub-limits
  • Insurance Claim

In Part 2 published in January 2017, we discussed the four D’s of insurance:

  • Declarations
  • Deductibles
  • Direct Writer
  • Dynamic Risk

In Part 3 published in this February 2017 issue, we shall discuss the four E’s of insurance:

  • Endorsements
  • Exclusions
  • Effective Date
  • Extended Reporting Period

Endorsements:

Endorsements are components usually as an added document form, or simply a check-the-box, which changes the insurance policy contract’s original terms, conditions, and coverage. Endorsements act as an amendment to the insurance policy contract.

Usually, endorsements are added when the policy is purchased or renewed and require additional premium. Think about it this way – an endorsement adds some sort of insurance coverage for an additional premium.

In Property and Casualty policies such as Professional Liability, General Liability, Cyber Liability, and Auto and Home Owners policies, the Endorsements generally add, expand, reverse, or delete clauses on one or more pages in the insurance policy contract form or Declarations page, and significantly change the coverage.

It is important that you understand the meaning that endorsements bring to the insurance policy. Either ask your attorney, or ask your insurance agent for clear interpretation, because endorsements may cause some confusion since they change the policy form contract with what amounts to amendments.

Your trusted NASW RRG’s customer service insurance licensed professionals will help you. This is especially important because confusion often occurs when policy stated exclusions are reversed, or partially modified through an endorsement because the legal language is complex and requires significant interpretation and thought.

Exclusions:

Exclusions are specific perils and exposures by the insurance carrier that are specifically identified and listed as not covered under the insurance policy contract. Exclusions specifically carve out perils, acts, liabilities, hazards, losses, or a variety of other coverages that the insurance policy shall not respond to. It is imperative that you read your insurance policy, declarations page, and endorsements thoroughly, and understand what you are buying.

Exclusions result in coverage gaps, so there will most likely be gaps in your coverage since the risk is shifted to you. For example, regarding professional liability policies, many insurance carriers specifically exclude all malpractice related coverage for social workers that arises from claims arising from divorce litigation of any kind because this is a common claim.

Frequently when spouses are getting divorced, their child is treated by a social worker. Eventually, that social worker becomes a named defendant in a lawsuit brought by one of the spouses for a wide variety of reasons. This is a common incident, so most insurance carriers exclude coverage.

The NASW RRG professional liability policy covers all related claims arising from divorce litigation. Moreover, most insurance carriers write their policy contracts with extremely narrow coverage provisions. So much so, that their policies effectively contain hidden exclusions and coverage gaps that mask the meaning and actually trick the buyer. The NASW RRG does not do this with any of its insurance policy contracts. All NASW RRG coverage is clearly, simply, yet thoroughly stated and backed by licensed and trusted customer service insurance professionals.

Effective Date:

This is the date that the insurance policy contract becomes binding. Proof of insurance is important and usually, is evidenced by a certificate of insurance or “COI”.

Social workers need proof of professional liability insurance to gain and to maintain their license. Also, if they rent an office, typically the landlord requires a certificate of insurance and occasionally be named as an additional insured.

Here is a warning. Too often social workers, and sometimes landlords, mistakenly believe that if the landlord is stated as an additional insured on a professional liability policy certificate of insurance, then the coverage exists as though it is general liability coverage.

Professional liability policies typically cover professional services involving malpractice when professional services as defined in the insurance policy contract are being delivered, but not slip-and-falls, fire perils, and many other perils that general liability policies cover. It is a best practice and extremely wise, for you to know your insurance policy expiration dates. About 90 days prior to expiration, begin to initiate your insurance policy contract renewal, including possibly shopping around and understanding your coverage and gaps in coverage.

Extended Reporting Period:

Think of this in terms of lifetime coverage and non-lifetime coverage. Claims-made policies are not lifetime policies. Occurrence policies are lifetime policies. Claims- made policies typically start with very low premiums, gradually increase premiums, and step up to a final level premium tier during a number of years.

In exchange for this initial premium subsidy and accommodation of abnormally low premium paid during the period up to the first 5 or 6 years of the policy contract, claims-made coverage stops at the point of policy termination. This means that claims that arise after the claims-made policy terminate, even if the claims originated from incidents that occurred during the time the claims-made policy was in force, but are reported after the policy termination, are not covered.

An extended reporting period (called “tail coverage” of “ERP”), is purchased that will then extend the insurance policy coverage for a stated number of years in the future, but for only those incidents that result from claims that arose during the original in force policy period.

Many insurance carriers elect not to sell claims-made policies because the premiums are too low during the early years compared to the risk which still remains the same as an occurrence policy. Many insurance carriers may not offer tail coverage beyond more than a year or two. Many insurance carriers do not want to bother with the burdensome administration time and cost to track policy premium adjustments in the early years and facing continued insurance loss risk after claims-made policy termination arising from the ERP contract endorsement.

The NASW RRG offers ERP or tail coverage for up to 12 years, and at below market rates. Moreover, if a social worker is retiring or becomes disabled, the NASW RRG does not charge a tail coverage premium.

Published February 2017

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