What is the Duty to Defend?
“Duty to defend” is a contractual obligation contained in almost every professional liability policy, which requires us, the insurer, to defend you against any lawsuit seeking damages for action that is covered by the policy. An insurer’s duty to defend has nothing to do with whether or not you are currently insured by that particular carrier. Furthermore, once your claim has been accepted, an attorney’s duty to defend is established and he or she is obligated to defend you to the best of his or her ability.
Understanding Your Policy
Right to Defend vs. Duty to Defend
Check to see if your insurer has claimed the right or the duty to defend you. A carrier that has “the right” to defend has a choice of whether or not to defend you; a carrier with “the duty” to defend you must do so to the best of their ability. When to Report:
Demand Trigger vs. Incident Trigger
A demand trigger policy normally requires a written demand for compensation in order to trigger the coverage. This can be a written document from an attorney or patient.
MedMal Direct Insurance Company offers an incident trigger policy which allows you to report a potential incident as soon as it happens to document and preserve it as a potential claim. In these situations, a reported incident will not count against the insured until there is a formal demand for compensation.
What is Covered: Defense Within the Limits or Defense Outside the Limits
An insurer that has a duty to defend will generally cover the damages (settlement or jury verdict) and the defense costs associated with your claim. However, depending on your coverage, the defense costs may affect your available limit of liability.
Defense within the limits coverage allows the insurer to deduct your defense costs from your policy limit. (For example, if you have a $1,000,000 policy and your defense costs $500,000, your policy limit would be reduced to $500,000). This type of coverage, commonly offered by excess and surplus carriers, may result in discounts for the insured.
Defense outside the limits protects the insured from reduced policy limits by covering defense costs independently from any damages.
Consent to Settle
MedMal Direct’s policy gives the physician consent to settle a claim. Some medical professional liability policies provide a premium decrease if a physician agrees to surrender the right to settle the claim to the insurer.
State laws regarding consent to settle vary; in general, absent some specific endorsement, your consent to settle is not affected if you choose to switch carriers. You have consent to settle, period.
When is the Right Time to Change?
If you have an incident trigger policy with a duty to defend, you can change insurers at any time after you have reported claims and known incidents to your carrier. All carriers penalize physicians once claims settle over a certain amount by eliminating discounts or increasing premiums; by switching now, your pricing is locked into place for the whole year because a carrier cannot increase your premium until your next renewal.
If you have a demand trigger policy and you have an incident that has not developed into a claim because there has yet to be a formal demand for compensation, it would be wise to stay with your current carrier.
If you have a demand trigger in your policy and have not had an adverse incident, now is the time to change to an incident trigger policy with MedMal Direct.