The importance of having the right malpractice company is even more important. I know most doctors don't like to think much about their company; as long as they have coverage, they just put it out of their mind. The problem is you only need malpractice coverage when you have a claim against you, but then you really need it, and you need a company that will stand behind you and provide you with an attorney that knows how to defend a doctor of chiropractic. There are many fine medical malpractice attorneys, but that is much different than one who really knows how to defend a chiropractor.
One of the most important things to consider about your company is
will it be there when you need it? Malpractice insurance is very different than auto insurance. With auto insurance, if you're in an accident and you have coverage, you are covered. If you don't, you're not. It's that simple. If you change companies, it's no big deal, as long as you have coverage.
With malpractice insurance, a claim rarely occurs on the date an incident occurs or is alleged to have occurred. It may be years later. Will your company still be there, and will you have coverage?
There are two types of coverage: claims made and occurrence. Occurrence is the best type to have, but it is more expensive than claims made. With occurrence, if you had coverage at the time an incident is alleged, as long as your company is still in business, you have coverage no matter when a claim is filed. With claims made, if you had coverage at the time an incident is alleged, but had cancelled your insurance, or your company had dropped you some time prior to a claim being filled, you have no coverage unless you purchased a "tail" policy. A tail policy can be very expensive, but it is necessary to assure your protection.
I would like to now talk about a soft market versus a hard market, and the worst nightmare of my professional career. A soft market occurs when malpractice claims are down and/or juries are not giving out huge awards. In a soft market the insurance companies are making a good profit, which prompts more companies to enter the marketplace, some with no experience in malpractice coverage. We are in a soft market now and have been for several years.
A hard market occurs when there is an increase in lawsuits and/or juries give out huge awards. In a hard market, many insurance companies stop making a profit; some even lose money and go out of business. During a hard market period, many companies that got into writing malpractice insurance during the soft market bail out, leaving their policyholders "hanging out to dry" and looking for a new company. Only now, it is not so easy to find a new company, because it is a hard market and no longer profitable.
The malpractice industry goes in cycles. Just as sure as there is a soft market today, there will be a hard market in the future. It's very difficult to predict when that will happen, but there are some clues that it may not be far off. Just this year, two of the largest medical malpractice insurance companies in Pennsylvania went bankrupt. The important question is whether your company will stay the course or bail out? Certainly, if they are a small, poorly-rated company, they may not have any choice. But just because your malpractice insurer is a major company with mega-assets does not mean they will stay in the market. History is filled with such companies bailing out during a hard market.
How do you know what your company will do? There is no way to be certain. I believe a solid indicator is the company's connection to the profession. Does it really have an interest in the profession's future, or is it there just for the profits? They all claim they are here for the "long haul," but history tells a much different story. The truth is insurance brokers sell most malpractice insurance, not the insurance company. The broker has an arrangement with an insurance company, but even the broker cannot be assured the insurance company will be there in the future. Agents work on a commission, so it's in the interest of their pocketbooks to tell you they are committed to being there for the long haul. They may actually be, but they still can't control what the insurance company will do when a hard market hits.
The worst nightmare in my professional career happened during a hard market. I was the president of the ICA at the time. A malpractice crisis hit, and companies bailed out of the marketplace right and left. It was almost impossible to find occurrence coverage. ICA had the world's largest insurance broker. We also had a contract with one of the world's biggest and largest insurance companies. They told us we had to drop our occurrence coverage and change over to claims made. We had little choice because we were unable to find another company that would write occurrence. Not long after we switched to claims made, they began raising the premiums. They raised them so high so fast that it was clear they wanted out of their contract with the ICA. If my memory serves me correctly, here in California my premium went from $2,000 a year to $13,000. That was 10 years ago. They then demanded a tail policy of $10,000 if we did not renew the claims made policy.
We had little choice but to have our broker look for another malpractice company. But even with all the broker's power in the insurance field (our broker was the world's largest) the broker was unable to find ICA a quality company. On the last day before we had to either sign a new contract with this insurance company and agree to outrageously high premiums or find another company, our broker found what most would consider a third-rate offshore company.
All of this happened because of the hard market. The malpractice insurance just dried up. It had nothing to do with anything ICA did or didn't do. Let me make it clear. This happened 10 years ago and is not a comment or reflection on the ICA's current company. I don't even know whom they are with now. I do know that the ICA lost more than 1,000 members overnight just because of this one issue. A lot of ICA members took out NCMIC insurance, which was one of the few quality companies still writing malpractice insurance coverage for chiropractors. I was one of those doctors.
I cannot begin to express the frustration and pain I went through as president of the ICA over this issue. Thousands of doctors were dependent on ICA for malpractice coverage. I took it personally that we were unable to resolve this problem the way it should have been. It was such a helpless feeling, and I did not like it! I never, ever want to go through something like that again. I vowed to do whatever I could to make sure my new carrier, NCMIC, would be strong, remain strong and always be there when I needed it.
I was (and am) passionate about this issue. After all, it was my worst nightmare. The stress of the Wilk vs. AMA antitrust lawsuit for 17 years was nothing compared to what I felt during the malpractice crisis. I believed the best way I could have an impact on NCMIC was to be on their board of directors. That is the reason I ran for the NCMIC board of directors a few years ago. I was elected, and I have had the pleasure of watching the company grow in strength and its ratings climb to the top of the mountain. NCMIC is the only malpractice company that I know of that has a vested interest in the chiropractic profession. Every member of the board of directors is a doctor of chiropractic. NCMIC gives over a million dollars a year to research, something that's vital to this profession's future, and supports many other worthwhile and important endeavors of our profession.
I just want to stress the point that this could happen again.
We're now in a soft market, but there will be another hard market. There's one phrase I heard that sums up my feelings: "There are no bargains in life preservers, parachutes or malpractice carriers."
Michael D. Pedigo, DC
San Leandro, California
Dr. Michael D. Pedigo is a past president of the American Chiropractic Association and the International Chiropractors Association, and the only doctor to receive the Chiropractor of the Year Award from both organizations. He practices in San Leandro, Calif., and can be contacted with questions and comments via his Web site: www.drpedigo.com.