Glossary of insurance terms
Claim — under a TMLT policy, a claim is considered any of the following.
- A demand for compensation — any written communication from or on behalf of a patient that seeks monetary payment or other compensation because of a perceived error in treatment or an unexpected outcome.
- A notice of claim letter — a letter that refers to Civil Practice and Remedies Code Section 74.052 or refers to a notice of claim. Upon receipt of a 74.052 letter, a physician and his or her insurer have 60 days to investigate and evaluate the patient's claim.
- A lawsuit — will contain a citation (which informs you of a lawsuit) and a petition (which lists the plaintiff versus the defendant). A lawsuit will also include the allegations made against you. Once you are served with a citation and petition, TMLT has a limited time to respond by retaining a defense attorney to file an answer on your behalf.
Claim frequency — refers to the number of claims filed in a given time period. Claim frequency is one factor used to determine insurance premiums.
Claim severity — refers to the dollar value of a claim as determined by a jury verdict or settlement agreement. Claim severity is another factor used to determine insurance premiums.
Claims-made coverage — a type of medical liability insurance. A claims-made policy protects you during the current policy period, usually one year. If you do not renew your claims-made policy, you no longer have coverage for any claims that may be filed in the future that are alleged to have occurred during the time your policy was in force. With a claims-made policy, you will need to purchase tail coverage.
Consent to settle — a clause requiring an insurer to obtain the policyholder’s consent before settling a claim. These clauses are included in most professional liability policies and are often found within a policy's defense and settlement provisions. In most instances at TMLT, policyholder consent must be given for any settlement.
Cyber liability coverage — protects against network security and privacy-related exposures, such as lost or stolen laptops or theft of patient data. This coverage is included with all TML T policies.
Declarations page — the first page of an insurance policy that contains the policyholder's name, address, specialty, limits of liability, premium amount, policy effective date, endorsements, etc.
Deductible — the amount of money the policyholder is responsible for paying toward an insured loss. Deductibles are the way to share risk between the policyholder and the insurer.
Demand for compensation — any written communication from or on behalf of a patient that seeks monetary payment or other compensation because of a perceived error in treatment or an unexpected outcome.
Disciplinary action coverage — Covers legal expenses, fines, and penalties arising out of medical board, hospital review committee, or other disciplinary proceeding. At TMLT, this coverage is known as Medefense, and it is included with all TMLT policies.
Dividend — a partial return of premium to the policyholder based on the insurer’s financial performance or on the policyholder’s own loss experience.
Employment practices liability coverage (EPLI) — coverage for employment-related claims such as harassment, wrongful termination, and discrimination. EPLI is included with all TMLT policies.
Endorsement — a legally binding change to an insurance contract that alter the terms or scope of the original policy. Endorsements can be used to add, delete, exclude, or alter coverage. They can be issued during the policy term, at the time of purchase, or at renewal.
Exclusion — a provision in an insurance policy that excludes and/or limits certain coverages.
General liability coverage — refers to a type of business liability insurance other than automobile, workers' compensation, or employer's liability that covers property damage or bodily injury. In a health care setting, general liability insurance would cover such incidents as a visitor slipping on a wet floor of a hospital or office.
Lawsuit — a legal document that describes the allegations made against you. A lawsuit also contains a citation (which informs you of a lawsuit) and a petition (which lists the plaintiff versus the defendant).
Limits of liability — limits are the maximum amount your policy will pay. With malpractice coverage, there are two limits. The first limit is the maximum per claim (known as "each claim"), while the second limit is the maximum paid during the policy period (known as "all claims").
Locum tenens coverage — covers a substitute physician who assumes responsibility for your patients during a scheduled absence. All TMLT policies include up to 30 days of locum tenens coverage per policy year.
Loss adjustment expenses — the amount paid by insurers to investigate, defend, and settle claims.
Loss history or loss run — a history of a person's medical professional liability losses.
Loss ratio — the percentage of each premium dollar an insurer spends on claims.
Malpractice insurance —covers health care professionals against claims arising from their practice. These policies pay defense costs and generally cover claims for medical error or neglect, even if the claims are without merit. See also medical professional liability insurance.
Medefense coverage — covers legal expenses, fines, and penalties arising out of medical board, hospital review committee, or other disciplinary proceeding. This coverage is included with all TMLT policies. See also disciplinary action coverage.
Medical director coverage — protects physicians who are also serving in an administrative role, such as head of medical staff. At TMLT, this coverage is available for $250 per year.
Medical professional liability insurance — covers health care professionals against claims arising from their practice. These policies pay defense costs and generally cover claims for medical error or neglect, even if the claims are without merit. See also malpractice insurance.
Occurrence coverage — a type of medical liability insurance coverage. An occurrence policy provides ongoing coverage for events that occur during the policy period, even if they are reported after the policy is cancelled. You do not need tail coverage with an occurrence policy.
Per-patient coverage — refers to medical liability coverage designed for emergency medicine groups, urgent care, or other groups that are structured on a per encounter basis. Pricing is based on the number of patient visits rather than the number of physicians in the group.
Policy period — the time frame that an insurance policy is in effect. In general, a policy period is set by the day the policy starts.
Premises liability — protects against claims of injury or damages that occur to patients while on your practice premises. TMLT's premises liability applies only to claims by patients, and it does not eliminate the need for a general liability policy.
Prior acts coverage — another type of supplemental coverage, prior acts is purchased from your new insurance carrier when you change carriers. Prior acts covers incidents that occurred under a previous claims-made policy that have not yet been reported. If new claims arise that occurred during the prior acts period, they are reported to your new carrier to be covered under the prior acts policy. (Prior acts is also known as "nose coverage.")
Reserves — an insurance company’s best estimate of what it will pay for claims.
Risk retention group (RRG) — an alternative insurance entity created by the federal Liability Risk Retention Act (LRRA). RRGs must form as liability insurance companies under the laws of at least one state — its charter state or domicile. The policyholders of the RRG are also its owners. Membership must be limited to organizations or persons engaged in similar businesses or activities, thus being exposed to the same types of liability.
Surplus — the amount of money remaining after an insurer’s liabilities are subtracted from its assets. It acts as a financial cushion above reserves, protecting policyholders against an unexpected or catastrophic situation.
Tail coverage — is purchased when your claims-made policy is canceled or non-renewed. Tail coverage continues insurance protection under your claims-made policy for claims arising in the future that occurred when your policy was in force. Tail coverage can be expensive because it continues coverage into the future. (Tail coverage is also known as a reporting endorsement.)
Tort reform — refers to legislation designed to reduce liability costs through limits on kinds of damages and through modification of liability rules.
Vicarious liability — legal responsibility for the actions of another person. In medical liability claims, physicians can be found vicariously liable for the actions of nurses, medical assistants, employed physicians, or other people for whom they are legally responsible.