8 Business Insurance Policies That Every Physician Should Consider

Physician practices face not only clinical and financial risks, but also business ones. Fortunately, insurance can mitigate many of these risks. But practice leaders may not be familiar with the different types of coverage available. Here are eight business policies that every physician practice should consider: 

1. Human resource malpractice. Employee allegations of discrimination, wrongful termination and sexual harassment aren't uncommon. Coverage is available to protect physician owners of the practice, human resource managers and the employees who committed the wrongful acts. Basic coverage extends to damages awarded to the employee-plaintiffs in the matter, while separate coverage may be purchased for legal defense fees.

2. Misappropriation of sensitive patient information. The news media report frequently about the unauthorized taking or disclosure of sensitive patient data. The exposure of the information may be accidental (computer system failure), or committed by an employee or a nonemployee hacker (cyber breach, identity theft). In addition to providing the usual coverages (damages, legal fees), insurance policies may help affected patients recover from the incident by restoring their impaired credit.

3. Employee theft. Insurance coverage for this risk provides protection if an employee steals or embezzles money or property from the practice. The theft of money may come from either accounts payable or accounts receivable. The minimum recommended base coverage is $100,000. The insurance carrier for this coverage (and many of these other coverages) should work with the practice to minimize the risk of an employee misappropriating practice assets.

4. ERISA fidelity bond. This risk involves a special form of employee theft. The Employee Retirement Income Security Act (ERISA) requires that the practice, as the sponsor of its staff retirement plan, carry an insurance policy to protect against employee theft of the plan's assets. The policy covers the employees who are managing the plan in a fiduciary capacity as well as those who invest in the plan's assets. The minimum required coverage amount is $500,000 or 10% of the plan assets, whichever is less. This policy often can be included as an endorsement to the general purpose employee theft coverage.

5. Practice-engaged vehicles. Insurance protection is required for vehicles engaged in practice businesses under two circumstances. First, the practice may own ― and buy traditional insurance coverage for ― vehicles used by its physicians and staff to carry out business responsibilities.

Second, it's also possible that employees may occasionally use their own automobiles to make bank deposits, pick up medications and test results, and run other errands for the practice. To protect against injury to an employee or third party in this latter situation, it's necessary to maintain nonowned auto insurance. The typical coverage limit is $1 million and accompanied by limits on which staff may use their personal cars for which types of practice business.

6. Business overhead expenses. If a physician in a small or solo practice can't work because of a disability or other problem, overhead expenses such as staff payroll, office rent and utilities will continue to be incurred. It's possible to buy an insurance policy that will provide the cash flow required to cover these expenses, allowing the practice to continue operating. The policy is marked by a 30- to 90-day waiting period between the start of the disability and the initial benefit payment. Typically, this coverage will pay overhead expenses for one to two years.

7. Umbrella protection. This policy protects against claims that exceed the coverage limits on any of the other types of insurance that the practice may carry. It may also fill in policy gaps, such as legal fees incurred to defend claims against the practice.

8. "Key man" coverage. This coverage applies to the lives and working abilities of practice members essential to its ongoing success. Typical examples are the physicians and other employees who are sources of significant revenue.

For more information, contact Deirdre Hartmann, CPA at (973) 328-1825.