Bringing a new physician into a growing practice can be exciting for both the group and the new hire. But even the best professional relationships can come to an end, and clarity at the beginning will serve all parties well, particularly if a departure is accompanied by hard feelings. For that reason, we strongly recommend that all groups make use of written agreements, whether the physician is an employee or an independent contractor.
When a contract does not specify rights and responsibilities regarding professional liability insurance coverage, the group and the physician might find themselves in a wasteful legal battle over insurance issues. Even small groups, which are often the least able to absorb the cost of unexpected litigation, can benefit from using employment agreements.
Most professional liability policies are written on a claims-made or claims-reported basis. When a physician is covered on a group's claims-made policy, it means that the policy applies to claims that a) arise out of the physician's actions on behalf of the group and b) are made within the policy period. When a physician leaves the group, he or she is not covered under the group's policy unless an extended reporting period (or "detail") endorsement is added to the policy. For most insurers, including The Doctors Company, an entity is covered for its vicarious liability for a physician who leaves the policy, unless that physician fails to obtain applicable tail or prior acts coverage.
A health care business attorney is your best source for ensuring that your employment agreements have all of the necessary elements. When creating a contract with your attorney, you should consider the following questions:
- Who is responsible for purchasing coverage (not only active insurance but also prior acts and tail coverage)?
- Who selects the program features (policy limits, deductibles; including who pays the deductible)?
- Who can change the policy, including the right to cancel coverage for the physician?
- Will the group allow the policy to provide coverage for prior acts unrelated to the group (including those in another state)?
- Will the policy cover the physician for moonlighting?
- Who has the right to request tail coverage from the insurer?
- Does the physician pay in the event of resignation or termination with cause?
- Does the group pay a portion of the premium based on years of service?
- Is payment required when tail is selected, or is it deducted from the physician's income?
- Can the doctor obtain prior acts coverage from his or her next insurer, and does he or she have to provide proof of it to the group?
Numerous courts have weighed in on issues related to professional liability requirements in employment contracts. Both physicians and administrators should note that many of these suits include allegations of breach of contract, specific performance, and declaratory relief. Generally, these types of allegations are not covered by any type of insurance, which means that the parties retain and pay their own attorneys, and they personally pay any judgment that may result.
Silence is not golden when it comes to professional liability terms in employment agreements. Medical groups and member physicians must invest in clear and specific contract terms regarding the purchase, maintenance, and termination of insurance coverage. Those that do can look forward to more amicable partings, with more time spent practicing medicine and less time in court.
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