Nearly every business needs errors and omissions (E&O) insurance. E&O insurance is a form of professional liability insurance that covers your businesses against the costs associated with the defense of civil lawsuits alleging a lack of compliance with the rules and regulations set forth by the state medical board and department of health. This coverage is not included in your medical professional liability insurance policy.
The success of your medical practice depends on minimizing your cost of doing business. For those looking to minimize the cost of their E&O insurance, following are four ways companies do so successfully.
1. E&O Coverage and Basic Insurance Principles
As it is with most insurance policies, medical practices can enjoy a lower E&O insurance premium when choosing to carry a higher deductible. The highest deductibles often offer the lowest premiums, but business managers and company owners should consider the risk before racing for the insurance policy with the lowest premium and the highest deductible. Deductibles are paid first before insurance coverage kicks in, and a large deductible has the potential to severely affect your cash flow, and ever your financial reserves if you are required to pay the deductible in it's entirety in one payment.
A basic factor that will impact Errors and Omissions policy cost is the amount of coverage the business or professional needs. Some policies pay all costs associated with a lawsuit, including defense costs, court costs and punitive damages awarded by the court. Other policies cover only part of those costs. Practice managers should analyze how much coverage they realistically need based on how much they could afford to spend on legal defense in the event of a lawsuit.
By carefully itemizing and analyzing the business' needs versus their areas of comfort, it is possible to create an Errors and Omissions policy similar to a buffet. You can choose the coverage that is best tailored to your needs while not paying for items that may never affect you or that you may be able to cover through self-insurance.
It is also important to choose an insurance company that has experience providing policies within your industry. The realm of medical malpractice, for example, is very different than the types of lawsuits that might be faced by a software firm. The same with choosing an attorney, you wouldn't choose an estate lawyer to represent you in a criminal case. By choosing an insurance carrier that specializes in your industry they will be more likely to create a policy that will adequately protect the business.
2. Be Diligent with Respect To the Law
Just as car insurance policies take into consideration the driving record and driving habits of the car's primary driver, Errors and Omissions insurers are just as concerned with the business habits and practices of the business that they are insuring.
The first point that an underwriter will examine is how the business follows the regulations and procedures for their industry. Failure to follow standard practices can be a significant negative when it comes to determining your E&O premium.
On the other side, many insurance companies give discounts to companies where employees take continuing education courses that deal with mitigating risk and following industry regulations.
3. Document Everything
Careful record keeping is important in almost every industry. Medical practices, for example, should keep detailed records of their interactions with patients in order to prove, if a lawsuit comes up, that they communicated clearly and consistently, that they were above-board in their dealings and that they followed the law.
Keeping written documentation of all patient or client interactions, conversations, simple verbal agreements or instructions serves the business in several ways. Most importantly the documents become a record of all dealings in the event that an E&O even occurs. But they can also serve by simply keeping everything organized and on task.
Email has also become a great source for documentation. Emails create an electronic paper trail that can be referred to quickly and easily. Their immediacy also makes them a great avenue for avoiding misunderstandings and addressing potential problems quickly.
When an individual makes an accusation against a practice, it is often the plaintiff's word against the defendant's. When the practice has a paper trail to back up its word, however, it is in a far more defensible position. A paper trail not only gives an insurance underwriter confidence but also gives the practice confidence that it could prevail in a lawsuit.
4. Follow Industry-Standards for Documents
Industry specific boilerplate documents have evolved for a reason. In nearly every industry the wording, acronyms and phrases can have an industry specific meaning that may not be understood by another industry. Disclosure forms, contracts, or industry specific applications are nearly always the same. When it comes to minimizing the costs of E&O insurance, these forms are not the time to be an industry maverick. Instead, businesses should stick to tried-and-true forms.
Insurance companies prefer standard operating procedures. Using non-standard documentation will be viewed as potential liability moving forward and your E&O premiums will reflect that. Insurers prefer paperwork that has been approved by governing bodies and regulating agencies.
Following these four tips will great help business owners and managers to reduce both risk exposure in general and E&O premium costs in particular.