Medical malpractice insurance carriers will offer clients options for "shared limit" or "separate limit" coverage from time to time, and it's essential to understand what these terms mean and how they impact your coverage.
But before we explain the difference between "shared vs. separate," you should understand that this option is often offered only for an entity or mid-level providers. On a standard medical malpractice group policy, each physician has their own individual, separate limit because this is usually a requirement to maintain hospital privileges.
That said, physicians are not the only ones that can be named in a medical malpractice case. Corporations and mid-level providers can be named in a claim, and it's vital that you properly insure these risks. Separate limits and shared limits have their merits though it can be difficult to distinguish the best choice for your practice. Below we will review what each option offers in terms of coverage and their benefits.
Separate Limit Coverage
When the corporation or mid-level provider has their own "separate limit", they have their coverage limit if pulled into a claim. If a policy does not have an "anti-stacking" provision, two Named Insureds with individual limits could be named in the same suit. Each has its own limit of liability available for coverage (this doubles the coverage).
Or, if the corporation or mid-level is named independently in a claim, they would be covered with their own limit of liability.
Separate Limit Claim Example:
A patient files a suit against three defendants: Dr. Smith, Mr. Nurse Practitioner & Doctors Practice PC. When the corporation and mid-level have separate limit coverage at a limit of $1M per claim (note that the limit can vary), they would be covered by the carrier, and each has $1M available for a claim. This means $3M would be available for coverage.
Shared Limit Coverage
Alternatively, if the corporation or mid-level has a shared limit, they would NOT have their own limit of liability if named in a claim. Instead, they must use another's limit of liability – likely one of the physicians on the policy with whom they are named in a suit.
Shared Limit Claim Example:
A patient files a suit against three defendants: Dr. Smith, Mr. Nurse Practitioner & Doctors Practice PC. When the corporation and mid-level are covered on a shared limit basis, the carrier will protect them, but they would share in Dr. Smith's limit of liability at $1M per claim (note that the limit can vary). This means that $1M would be available for coverage.
Price Difference between Separate & Shared Limit Options
Many groups will consider adding their entity or mid-level providers on a shared limit basis because of the potential cost savings. Most carriers will add corporations or mid-level providers for no additional premium or a minimal charge. In addition, shared limit coverage does not trigger a tail offer upon coverage termination, as long as the person/entity they were sharing limits with continues their coverage.
Carriers do charge for separate coverage limits, which means increased expenses for a practice. Additionally, the carrier will consider if providers are regularly terminating coverage.
Which is right for you?
Now that we have a better understanding of what each option brings to the table, it's essential to weigh the options carefully and not solely on their accompanying price tag. To better understand the difference, let's compare shared vs. separate limits to flying with a child and deciding whether to purchase an additional seat for them. In this scenario, think of your practice's corporation as your "child."
A shared limit would be the equivalent of not purchasing an additional seat on the plane for your child and instead opting for them to sit in your lap for the flight. For the most part, sharing your seat is an acceptable option where you both still arrive safely to your destination and get two tickets for the price of one. From a cost standpoint, it may seem like shared limits are the best option but bear in mind, it could get uncomfortable if your "child" acts up or if there is turbulence.
Alternatively, separate limit coverage is like paying for an additional seat for your "child" on the flight. While this may incur a higher cost, your child will be safer should turbulence occur, and you will have more peace of mind.
When was the last time you reviewed your medical malpractice insurance policy with your agent to ensure your "child" is adequately covered? Contact your agent today to discuss your options or if you have additional questions.