Professional Liability insurance is easiest to explain in the context of General Liability Insurance. As a reminder, General Liability insurance pays for bodily injury and property damage that you cause to another person or organization. Think of hurting somebody or breaking something.
So what if somebody got hurt in your program, but it didn’t happen as a result of something you did directly? What if it happened because of something you failed to do?
For example, a childcare employee is watching their phone instead of a child and the child burns their feet on the sidewalk on a hot summer day.
Or in a group home, a resident wanders off the property and gets hit by a bus.
In both of these situations, someone got hurt, but not as a result of a person directly hurting the child or resident. The damage happened because there was a lack of care or a failure to supervise.
Social Service organization is a broad term. It can be a home health provider, a daycare, a homeless shelter, etc… In all these situations, the organization makes a promise that they will take care of someone. The failure to provide that care can result in serious injuries.
This means that almost every social service organization needs social service liability.
Here are 6 key components of your professional liability program to consider:
1. Types of Services covered under the policy.
This is usually listed at the very top of the first page of the policy form. The policy will have a big box with “Covered Service” inside.
Make sure this box describes your services.
If you’re a home health agency, it should say home health agency. If you are a foster care agency, it should say foster care.
If this term in this box doesn’t accurately describe your services, this should be an automatic red flag that the insurance company does not understand what they are insuring.
For example, if you provide in-home support services and you run group homes, but the box only lists “Nurses Aide”, this should be cause for concern.
2. Types of Services Excluded under the policy.
Professional Liability policies typically say something like “We will defend and indemnify you for ‘wrongful acts’…”
Wrongful acts is the broad term used to describe a mistake in your operation. The company works backward from this point and describes all the “wrongful acts” it will not pay for. Pay attention to this list. I’ve seen policies for substance use disorder programs that list “residential programs”, and “detoxification” services as not covered.
Generally speaking, if your policy is inexpensive, there is a reason for it. The covered services will be very limited.
3. Types of Professionals covered under the policy
Professional Liability policies will define who is an “insured”. They usually state that all employees and volunteers are insured under the policy.
After that, it will limit the type of professionals covered under the policy.
Keep in mind, insurance companies make their products to describe one specific kind of business, and they want all the businesses they insure under that product to look very similar.
Speaking plainly, if the company thinks you’re a home health agency, they don’t want to be on the hook if you decide to start an accounting firm under the same corporation.
The policy will state that it does not include accountants, lawyers, tax professionals, etc..
It will also say medical professionals are not covered. Depending on the services you provide, this can be an issue.
Make sure to reconcile covered professionals with the ones you have on staff.
4. Individuals vs Organizations Professional Liability
I’ve talked to many counseling firms explain they don’t need professional liability for the business because “everyone here carries their own professional liability insurance.”
Here is my explanation of why the business still needs professional liability insurance.
In America, Corporations are people.
If your firm has 8 counselors, there are 9 people involved with the business. 8 counselors plus the corporation. All 9 people need insurance.
The counselors carry professional liability insurance to protect themselves. The corporation carries insurance to protect itself. Most individual policies are not designed to protect the corporation. And policies for the corporation only protect the individuals in so far as they are working on behalf of the corporation.
The corporation needs to protect itself.
5. Contracted Physicians and Vicarious Liability
This part gets quirky.
Let’s say you’re an outpatient mental health clinic and you contract with a psychiatrist to conduct psychological evaluations. They’re not your employee. And as we identified earlier, certain medical professionals are likely to be excluded. Yet if they are conducting evaluations for the organization, there is a risk that needs to be covered.
A good social service policy will provide what is called “Vicarious Liability”. This is professional liability that protects the organization for contracted Medical professionals, as long as they carry their own medical professional liability for $1,000,000.
6. Occurrence or Claims Made
Every liability insurance policy will define the time frame coverage is in effect. The coverage form will either be occurrence or claims made.
Here’s the layman’s explanation of the two.
Occurrence means you buy a coverage amount for a time slot. If you buy $1,000,000 of coverage for the calendar year of 2024, you will always have $1,000,000 of coverage for claims that occurred during the calendar year of 2024, regardless of when the claim is reported.
Claims made means you rent a time slot. If you rent $1,000,000 for the calendar year of 2024, you have coverage for the calendar year until you stop renting it.
With professional liability claims, there is sometimes a lag between when the claim occurred and when the lawsuit is filed. Timing of coverage and the claim can be a big deal.
There are advantages and disadvantages for each way of doing it. There’s not enough space in this post to evaluate the pros and cons of each.
There are numerous other factors that I could not cover in this article. While I can’t review every nuance of a professional liability policy in one post, this does review six key factors for evaluating a policy. This framework can help evaluate whether the professional liability program in place for your social service is the right one.
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