Directors & Officers (D&O) Insurance is essential in the healthcare industry and a good policy for providers. Healthcare is a challenging and complex industry with intense standards and regulations. Ultimately, risk management is necessary to provide patients with optimal care and for facilities to survive in the industry. Insurance is one of the main facets of risk management. While most physicians focus on malpractice insurance and workers’ compensation, one of the most overlooked policies is D&O insurance.
D&O Insurance for Healthcare Facilities
D&O Insurance protects the interests of the corporate directors and officers of the facility. If an employee, competitor, patient, vendor, or other party files a lawsuit against one of the officers, D&O coverage will protect the officer’s assets.
D&O policies protect the healthcare organization. Likewise, the policies cover settlements, legal fees, and other expenses of an alleged wrongful act.
Examples of Common D&O Claims
In business, directors and officers face lawsuits for various reasons related to their roles within the company, including:
- Misrepresentation of company assets
- Misuse of company funds
- Failure to comply with laws and regulations
- Breach of fiduciary duty
- Intellectual property theft
One of the most common claims involves mergers and acquisitions. For example, an investor may file a lawsuit against a physician group after acquiring a clinic. If the investor analyzes past revenues and finds inaccuracies in the records, the investor could sue for inaccurate financial history. Additionally, the policy may cover the legal expenses if the physician group has D&O insurance.
The Importance of D&O Insurance for Healthcare Providers
The healthcare industry is one of the most regulated industries. With over 6,000 hospitals in the U.S., it has to be regulated by various laws and regulations. Directors and officers insurance for medical providers focuses on the unique claims raised against medical professionals, such as:
- HIPPA violation claims
- Emergency Medical Treatment and Active Labor Act claims
- Peer review and credentialing claims
Even if your hospital has HIPPA violation claims coverage, the amount paid for violations tends to be far below the policy limit. Moreover, policies other than D&O may not cover over-reimbursements.
Directors & Officers Insurance Policies
There are three common agreements for D&O insurance policies. Most insurers refer to these coverages as Side A, B, and C.
Side A coverage covers any claims the company refuses or cannot pay for damages. For instance, if a clinic claims bankruptcy, it may be unable to pay any damages. Side A protects the individual officer’s personal assets.
Side B coverage covers losses when the facility grants indemnification. Additionally, Side B coverage reimburses the facility for legal costs. This type of coverage involves the hospital and its corporate assets.
Side C is entity coverage. It is a coverage for the corporation itself.
Since healthcare facilities have fewer D&O risks, some insurance companies will offer D&O coverage as part of other policies. Likewise, the cost of the coverage may depend on your history with D&O claims.
When it comes to running a healthcare facility, protecting the hospital’s assets and the officers’ assets is critical. There are various types of risks involved with running a facility, and without D&O insurance, the facility, directors, and officers could lose assets due to litigation.
About Connected Risk Solutions
At Connected Risk Solutions, we use our expertise and experience to provide insurance information and programs to those who serve long-term care and senior living facilities. Since 2007, we’ve been offering insurance and risk management plans designed to help our agents give their clients the ability to achieve continued growth while simultaneously protecting against loss, containing costs and increasing profitability. With three offices to serve you in Chicago, Illinois; Phoenix, Arizona; and Burlington, Connecticut, we do everything we can to make your experience with us as professional and transparent as possible. To learn more, contact us at (877) 890-9301.