United States: Nine Business Insurance Policies That Every Physician Should Consider

Last Updated: June 26 2016
Article by Joe Chivini

Physician practices face not only clinical and financial risks, but also risks related to business. Fortunately, insurance can mitigate many of these risks. However, practice leaders may not be familiar with the different types of coverage available. Here are nine business policies that every physician practice should consider:

  1. Human Resource Malpractice

    Employee allegations of discrimination, wrongful termination and sexual harassment are not uncommon. Coverage is available to protect physician owners of the practice, human resource managers and the employees who committed the wrongful acts. Basic coverage extends to damages awarded to the employee-plaintiffs in the matter, while separate coverage may be purchased for legal defense fees.
  2. Misappropriation of Sensitive Patient Information

    The news media reports frequently about the unauthorized taking, or disclosure of, sensitive patient data. The exposure of the information may be accidental (computer system failure), or committed by an employee or a non-employee hacker (cyber breach, identity theft). In addition to providing the usual coverages (damages, legal fees), insurance policies may help affected patients recover from the incident by restoring their impaired credit.
  3. Employee Theft

    Insurance coverage for this risk provides protection if an employee steals or embezzles money or property from the practice. The theft of money may come from either accounts payable or accounts receivable. The minimum recommended base coverage is $100,000. The insurance carrier for this coverage (and many of these other coverages) should work with the practice to minimize the risk of an employee misappropriating practice assets.
  4. ERISA Fidelity Bond

    This risk involves a special form of employee theft. The Employee Retirement Income Security Act (ERISA) requires that the practice, as the sponsor of its staff retirement plan, carry an insurance policy to protect against employee theft of the plan's assets. The policy covers the employees who are managing the plan in a fiduciary capacity as well as those who invest in the plan's assets. The minimum required coverage amount is $500,000 or 10% of the plan assets, whichever is less. This policy often can be included as an endorsement to the general purpose employee theft coverage.
  5. Practice-Engaged Vehicles

    Insurance protection is required for vehicles engaged in practice businesses under two circumstances.First, the practice may own ― and buy traditional insurance coverage for ― vehicles used by its physicians and staff to carry out business responsibilities. Second, it is also possible that employees may occasionally use their own automobiles to make bank deposits, pick up medications and test results and run other errands for the practice. To protect against injury to an employee or third party in this latter situation, it is necessary to maintain non-owned auto insurance. The typical coverage limit is $1 million and accompanied by limits on which staff may use their personal cars for which types of practice business.
  6. Business Overhead Expenses

    If a physician in a small or solo practice cannot work because of a disability or other problem, overhead expenses such as staff payroll, office rent and utilities will continue to be incurred. It is possible to buy an insurance policy that will provide the cash flow required to cover these expenses, allowing the practice to continue operating. The policy is marked by a 30- to 90-day waiting period between the start of the disability and the initial benefit payment. Typically, this coverage will pay overhead expenses for one to two years.
  7. Umbrella Protection

    This policy protects against claims that exceed the coverage limits on any of the other types of insurance that the practice may carry. It may also fill in policy gaps, such as legal fees incurred to defend claims against the practice.
  8. "Key Man" Coverage

    This coverage applies to the lives and working abilities of practice members essential to its ongoing success. Typical examples are the physicians and other employees who are sources of significant revenue.
  9. "Directors & Officers" Coverage

    Getting the right policy for your role as a physician entrepreneur and executive is very important. The scope of the liability for doctors is wider than most realize. You have all of the conventional medical practice related issues such as HIPAA compliance, Medicare and Medicaid billing regulations, and of course the policies and procedures related to care delivery itself. Add to that responsibility for issues ranging from waste disposal and employment policies, to accounting and tax reporting, and you begin to see the tip of the iceberg we are trying to avoid and protect you against.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Joe Chivini
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