Chris D. Callen
Author`s Note: In Part I of this two-part series, I`m going to cover property and casualty insurance. Typically, the agent(s) you use for this insurance are not the same ones that you use for your life, health, and disability insurance needs. Most dental offices have not had all of their insurance coordinated into a sound, "lean and mean" portfolio due to overlapping coverage and advice from multiple agents.
In this article, I will address the problems that my firm sees with property and casualty insurance policies in the dental offices that we work with across the United States. In Part 2, scheduled for the October issue of Dental Economics, we will cover the life, disability, and health insurance aspects of a proper insurance portfolio for a dentist.
For the past 16 years, my firm has been analyzing the complete insurance needs for dentist-clients across the United States. Over the years, we have accumulated many unusual insurance concepts that most dentists should follow, but don`t. As a result, many dentists are exposed to personnel problems that could ultimately result in substantial liability claims and/or regulatory fines. The purpose of this article is to help you discover some of the most commonly missed areas and apply them in your practice.
Medical malpractice insurance
If you are incorporated, be absolutely sure that you have either a corporate malpractice policy or a corporate endorsement on your malpractice policy. Quite frequently, dentists incorporate after several years of being in practice and do not inform the insurance company. As a result, when the dentist is sued, the corporation is sued as well and the dentist winds up having to pay the cost of defending the corporation out of his/her own pocket.
If you have an associate dentist, be sure the associate is covered by his/her own separate policy. Sometimes, an associate assumes he or she is covered under the dentist-owner`s corporate policy.
The difference in cost is less than $200 a year between a $500,000/$1,000,000 aggregate malpractice insurance policy and a $1,000,000/$3,000,000 aggregate policy. We think this is a small price to pay for peace of mind. With the $1,000,000/$3,000,000 policy, you know you have maximum protection in the event of a multiple patient suit.
Be sure that your policy is not "location specific," meaning that you must list on your policy the exact locations where you are practicing. If you cover for other dentists during their sickness or vacation, you should notify your carrier so that you have the appropriate coverage.
If you do implants (usually involving more than 10 percent of your practice coverage, notify your carrier. Many companies charge extra rates for dentists doing implants. Some carriers won`t even insure a dentist that does implants. Be sure that your carrier will cover you if you do implants.
In many states, dentists purchase their malpractice insurance from a state association or state risk pool. Be sure that the policy does not exclude coverage for "peer review defense." Many of the state plans offer this coverage as an option and charge an extra rate. To be competitive, they usually do not show you the rate for this option. If you need to hire an attorney to defend yourself for a peer review claim, you will have to pay the cost out of your pocket, including picking up the cost for lost work due to deposition time.
Be sure your policy contains general liability coverage, as well as coverage for automobile accidents caused by your employees in their cars doing your errands. If an employee goes to the bank to make your deposits and has a wreck, it is your wreck. About 50 percent of the policies we review do not have this important coverage. We recommend $2,000,000/ $4,000,000 of liability coverage at an average additional cost of $50 per year for the general liability upgrade. The increase for the employee auto liability upgrade should be about $100 a year or less.
If you entertain staff where alcohol is served (such as a summer outing or a Christmas party), you must have a liquor legal liability rider on your policy. About 80 percent of the policies we review do not contain this option. This coverage is required if you buy other dentists drinks after seminars as well. If you buy someone alcoholic drinks and an auto accident occurs as a result, you could end up being held liable for the accident and any personal injury claims that may arise. We recommend $2,000,000 per occurrence/$4,000,000 aggregate of liability coverage for this section of the policy. Typically, the cost is minimal (as little as $20 a year) to add this option.
If you employ another dentist to help fill in during an extended illness or vacation, be sure your carrier is notified so that "locum tenants" coverage can be added to your policy. This provision extends the benefits of your policy to the replacement dentist for a temporary period of time. Sometimes, there is no extra charge to add the other doctor. However, your insurance company must be notified prior to the other doctor starting work.
If you employ an independent contractor dentist (and/or hygienist), the independent contractor must maintain his/her own general liability policy, as well as a worker`s compensation insurance policy. Many times, independent contractors think that they are covered by the policy maintained in the office. However, because they are independent contractors, they are not affiliated with your office and, hence, need their own policy. We recommend that they purchase a complete business overhead policy (known as BOP). The cost is not much more than the cost of a general liability policy. The independent contractors can get all of the other features associated with the full BOP policy.
Your office policy does not provide any coverage in the event of a disability claim. Many of our clients assume that their office policy will pay for continuing operating expenses during an extended disability. Only a separate type of policy will cover these types of expenses. Perhaps much of the confusion is derived from the similar names of the two policies. One is the business overhead policy (for the office) and the other is called a business overhead disability income policy, which covers the operating expenses of a dental office during an extended sickness or injury to the dentist.
It costs between $85 and $135 to replace a dental chart. This cost represents not only the cost of the materials to replace the chart, but the cost for the scheduling room setup and cleanup, professional examination time, X-rays, and oral camera pictures. We recommend using $100 per chart when estimating the replacement cost. Most of the policies we review contain coverage for less than $25,000. Most offices we work with will need to replace between 1,500 and 3,000 charts. This means that these offices need $150,000 to $300,000 of coverage. Note: some companies offer valuable records coverage within their overall maximum policy limits. However, this blanket amount usually does not allow for enough protection for chart replacement. The typical costs to insure charts is about $2 per $1,000 of insurance coverage.
Many of the policies we review have extremely limited business interruption coverage. This is the heart of your policy. This benefit pays you the cost of your average daily billings after just 12 hours of down time. It should last until you get your business reopened and operating again. In the event of a major loss, it could take you six to eight months to get back to full operational capacity. Your policy should be making up the difference in billing loss during this time frame. However, many of the policies we review contain a benefit limit of as little as $250 a day for as short a time period as 30 days. You may very well need $2,000 a day or more of replacement income. Also, be sure to check that your policy will cover you for business interruption circumstances that happen outside of your property, such as a citywide power loss. Many policies only cover you for losses if they occur within your building or within50 feet of your building.
Worker`s compensation insurance
We recommend taking worker`s compensation, even in those states where it is optional. Although many states do not require you to buy this kind of insurance, you may find yourself responsible for paying the valid claims of your employees! These claims could include the cost of their work-related injuries and lost wages. You also could be sued by the employee or the employee`s family for additional damages if the result of the injury was tied to negligence in the workplace on your part. Be sure that you have a worker`s compensation policy.
We recommend putting all of the dentists/owners onto the worker`s compensation policy. In addition to paying for any work-related health insurance claims, it will provide for replacement income as well. In many states, the doctor can get up to 60-70 percent of the first $45,000 to $70,000 of income paid to them during a total disability claim. If a personal disability policy is not integrated with social security insurance, a disabled dentist could receive claim money in addition to income from a personal disability income policy.
As stated previously, if you employ an independent contractor or if you are an independent contractor, be sure to obtain a separate policy. If you employ an independent contractor, these individuals are independent of the office worker`s compensation policy.
If you buy your worker`s compensation insurance from a private insurance company, you do not need to purchase this policy. However, if you buy your insurance from your state government, check to be sure stop-gap insurance is included in your policy. Most of the time, it is not. This policy pays for the cost of defense and damage awards for claims made by an injured employee or the employee`s family. Employees with latex-glove allergies file many of these claims. Successful suits have been launched against dentists because they did not do the "due diligence" testing for their employees before they discovered the employee had a latex-allergy problem. Many dentists now are sending their employees to an allergist to get screened for a latex allergy as part of the new-employee indoctrination phase. Other types of claims can be for injuries such as those caused by faulty equipment. If an employee falls off a ladder that you knew was rickety and is severely injured, you could be sued for negligence. The cost of this policy usually is only about $100 a year and it could turn out to be extremely valuable to you.
ERISA bond insurance
Often, dentists are unaware that if they have a qualified pension or profit-sharing plan, they are responsible for maintaining a bond representing 10 percent of the plan`s funds. This bond will pay the employees for a loss of plan funds doe to criminal activity.
Check your business-office policy to be sure that an appropriate amount of this bond coverage is included in the policy. Some policies include a minimal amount of coverage. Typically, the cost of your start-up bond should be only about $100.
If you are not sure that you have one of these bonds, contact your property and casualty agent (home/auto/office policy agent) and purchase one.
Employer relations insurance
This policy recently was developed to meet the needs of businesses to cover themselves for the defense cost and court-ordered payments for labor lawsuits. Typically, these policies provide coverage for wrongful hire, sexual harassment, and defamation of character suits.
These are usually expensive policies. Typically, a $1,000,000 policy, which provides unlimited costs for legal defense, costs as much as $5,000 to $6,000 a year. This is a small price to pay when the average cost to defend one`s self in these suits is over $40,000. We know of one company that will offer a special policy for dentists only for as little as $750 a year if a business office or malpractice policy also is purchased through this company.
Many dentists are unaware that the typical homeowner`s policy will not cover any losses if caused by a piece of equipment used in a business or if the loss is a business-related personal injury. An example would be the dentist whose spouse is a realtor working out of the home. If the business fax machines shorted out and caused a loss, the policy might not pay the claim. Another example would be a spouse that teaches piano in the home. If a student were injured on the premises, a lawsuit probably would not be covered by the dentist`s personal homeowner`s policy. The reason? Because it would be considered a business claim.
If you or any family member transact any business from your home, check with your agent to see if you need to add a business insurance policy. Perhaps you could add your home to your existing office policy, especially if any form of dentistry is performed in the home.
Personal and business auto insurance
Dentists frequently take a partial or full deduction for an automobile. If this is the case, you should immediately inform your agent of the percentage of time your car is used in the business. It likely could result in having to change your car to a business classification (which means higher rates) on any vehicle being deducted by the business.
Be sure that you have not indicated on your business-automobile insurance application that all drivers of your business vehicle are covered under your worker`s compensation policy. If you answered "yes" to this question, you most likely will qualify for a lower premium. However, if any of your family members drive your "business" car and have an accident, the insurance company might not pay the claim. They also could ask for back payments and then cancel your policy because you had not been forthright with them. Be sure to check with your agent on this point.
Personal and business iability insurance
Many dentists have a personal liability umbrella policy for $1,000,000. This policy will provide excess liability coverage for suits involving your car, home, or personal activities after the limits on your base policy are exhausted. Most dentists have only $300,000 of lawsuit protection for lawsuits that are related to their car or home. For another $100 a year, you could have a $3,000,000 policy that would cover the entire family for personal liability suits.
A personal umbrella policy will not provide any coverage for a business lawsuit. We recommend taking out a $2,000,000 business policy. This will layer over your existing $1,000,000 base policy. This policy will provide excess coverage for lawsuits from such things as employee automobile accidents when on company business. Typically, the cost for a $2,000,000 business umbrella policy is about $400 a year.
Year 2,000 (Yk2) liability insurance
With the advent of the new millenium, a new and important addition to your business- insurance portfolio has been made available. Many government and private-business computer systems and electronic equipment may not operate properly after Jan. 1, 2000. That`s because in the early days of computer programming, most operating systems and computer chips used only a two-digit code to identify a date.
On 1/1/00, many systems may not recognize the year 2000 and revert to 1900. If this happens, many businesses may fail and many dentists may suffer financially as a result. To protect yourself and your business, a new type of liability insurance policy has been created. It is called Y2k insurance. A policy may be purchased that will compensate your business for losses directly attributed to the Y2k problem.
The downside to purchasing one of these policies is that very few companies are offering the insurance and it is very expensive. At the time this article was written, the author was aware of only two companies offering this type of policy. We have heard that the rates are as high as $.60 in premium for every $1.00 that is insured! Many insurance companies are taking the position that this is not a reimbursable risk, as it is a known problem that can be fixed.
You should check with your business property and casualty insurance agent and have the agent check into the availability and feasibility of a policy for your office.
Have a concern?
If you have a concern that your policies do not contain all of the correct features and want to be sure your insurance portfolio is in compliance with your needs, please take note. Our firm will provide you with a comprehensive insurance analysis of your entire insurance needs on a complimentary basis. To complete this analysis process, you must provide us with several items. These items include all of your insurance documents, along with a copy of your most recent taxes and a completed "Health and Lifestyle Questionnaire," which will be sent to you upon request. The questionnaire also may be downloaded directly off of our Web site. However, you must call us first to get the required password. Upon completion, we will set up a teleconference meeting to review our findings with you. You may contact us at (614) 899-2541 or e-mail us at [email protected]. You also are invited to visit our Web page at www.cdcallen.com for updates.