Caption Corner Part 7 – The 3 I’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; and Insurance Claim.
In Part 2 published in January 2017, we discussed the four D’s of insurance:
Declarations; Deductibles; Direct Writer; and Dynamic Risk.
In Part 3 published in February 2017 issue, we discussed the four E’s of insurance:
Endorsements; Exclusions; Effective Date; and Extended Reporting Period.
In Part 4 published in March 2017 issue, we discussed the four Fs of insurance:
Form, Fraud, First-Party Risk, and First-Named.
In Part 5 published in April 2017 issue, we discussed the three Gs of insurance:
General Liability, Group-Owned Captive, and Guaranty Fund.
In Part 6 published in May 2017 issue, we discuss the three Hs of insurance: Hazards, Hold Harmless Agreement, and Hard Market.
In Part 7, we discuss Insurable Interest, Insured, and Insuring Clause.
But first, let us briefly review “insurance”, since that too, starts with an “I”. Insurance is a risk transfer technique. It is a form of protection against the risk of loss provided by the insurance company which collects a pool of premiums from insureds to pay for future losses that will inevitably occur.
The person or entity (called the insured), who buys the insurance through an insurance policy or contract, pays the premium as consideration and shifts the risk of loss to the other contracting party regarding certain perils. The other contracting party is the insurer or insurance carrier. The insurance policy is the contract that specifies the circumstances, events, and conditions with respect to the indemnification. Over $5 trillion of gross insurance premiums are written each year worldwide.
This is a business, a practice, a person, or other relationship that exists between the named insured with an interest in something which could sustain a risk exposure or peril. Moreover, an insurable interest exists when the insured person or entity derives a financial or other interest or benefit from the continuous existence, and when loss of, or damage to that interest causes the person or entity to suffer a loss such as financial loss, property loss, liability to others, or a life and accident loss.
For example, people have an insurable interest in their house because they own it. They have an insurable interest in their furniture because they own it. They do not have an insurable interest in their neighbors’ house and furniture. In the social work profession, the insurable interest is rooted in the social work practice and the related activities that expose the insured social worker to a variety of liability-related risks called perils.
These liability risks pose a variety of threats to the social worker that are reduced to monetary loss claims expenses. These expenses arise either through a legal defense, fines, penalties and other non-indemnity expenses arising from a claim. The indemnity portion of a claim, if applicable, is for the restoration or reimbursement to the insured for the extent of the loss. Indemnity monies arise from a claim such as a litigation settlement, court judgments, and cash awards to plaintiffs.
The most common claims expenses for social workers are typically legal services related to or include records requests, legal defense for State Licensing Board inquiries, breach of confidentiality, deposition, subpoenas, trial testimony, and general dissatisfaction with care. Negligence (the legal elements to prove are a duty, breach, proximate cause, and damage), is a commonly based lawsuit element.
This is a person or entity that is covered by an insurance policy contract. The insured may include individuals not expressly named in the policy such as contractors and employees. It is the duty of the insured to pay the premium when due and represent fully and faithfully all of the circumstances relating to the insurance which may influence the decision to underwrite and accept the risk by the insurance carrier. A concealment of such facts amounts to fraud, which voids the insurance contract and has criminal consequences.
Named insureds are stated in the insurance policy Declarations section of the policy and can be individuals or businesses. A word of warning – If partners in a social worker practice buy a malpractice or professional liability insurance policy together, and one of the partners causes a claim to occur because of his or her own actions, then both partners can be named in a lawsuit for the actions of the one partner. If those actions are exclusions under the insurance policy, then both partners will not have insurance coverage. Therefore, both partners are liable to pay for their own respective legal fees in order to defend themselves in the lawsuit at their own expense.
This is the section of the insurance policy that follows the Declarations section and expressly states the risks (perils), which are covered for the insured.
In other words, the insuring clause sets forth the risk that is assumed by the insurance company and defines the scope of the insurance coverage. This includes the perils and risk exposures that are covered by sub-limits if applicable and the aggregate amount of insurance for the policy term. Coverage limitations and insurance policy exclusions are also listed.
The insuring clause lists what the insurance company agrees to pay on behalf of the insured, such as all sums that the insured shall become legally obligated to pay as damages. Make sure that you understand the insurance named perils, policy limits, sub-limits, and all incident limits. Most insurance policies limit incident occurrences for certain frequent perils as well.
It is very important when comparing insurance policies to read each policy’s insuring clause and to read and understand in the insurance policy contract what the exclusions are. You may likely not be covered for what you think you are covered for.
Published June 2017