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Industry Risk Report: Health Care
With Batch Claims, Stop the Bleeding
It’s a nightmare scenario: A distraught man walks into a hospital emergency room, undergoes a psych evaluation, confides frightening thoughts about hurting people he loves. He walks out with a prescription for anxiety medication. Several hours later, he shoots his wife and six other people. Four die, three are seriously wounded.
Sadly, the scenario hits close to home, with similar tragedies happening on an all-too-regular basis. Such an event, obviously, is a nightmare for the families involved. It’s also extremely complex from an insurance perspective, said Shep Tapasak, managing principal, Integro Insurance Brokers, because it creates a set of “batch” claims, a term used for certain sets of related events.
Who Pays?
In this type of scenario, Tapasak asks, which coverage responds? A number of things could create inconsistent treatment up the tower of policies, especially if the secondary/excess coverage does not adopt the terms and conditions the primary coverage spells out in a follow form, which is intended to impose consistency throughout the tower.
For example, if the lead carrier’s professional liability policy specifies that it responds to claims from a medical incident, that coverage would be in play because of the shooter’s treatment at the emergency room.
However, some excess carrier forms might respond to this scenario as a general liability event, he said, since the claims were not brought on behalf of a patient. “Then the situation gets complicated,” he said.
While captive policy forms generally help mitigate inconsistent terms or conditions, Tapasak said, “reinsurers may have their own ideas about policy language, especially in such key issues as ‘batch.’ ”
Many facilities, including hospitals, carry high self-insured retentions. Insureds are able to transfer much of their risk to their excess insurers through these aggregation/batch provisions, said Robert Nils Lane, Esq., executive vice president, WTW Resolutions.
Although the exact definition of a batch claim varies by policy and jurisdiction, Lane said, the term refers colloquially to “an aggregation of multiple claims or claimants into one bucket,” so the claim must satisfy only one self-insured retention to trigger the excess coverage.
These claims occur mostly in the context of general liability insurance coverage or professional liability and pivot on “a consistent act or omission that led to allegation of wrongdoing, typically around bodily injury,” Lane said.
Darryl K. Thomas, chief claims officer, HCPL, ProAssurance Corporation
To avoid carriers in the tower of policies pointing fingers at each other over ambiguities, Holly Meidl, senior vice president, North American health care, Allied World, looks for “consistent definitions within a single program tower and contract language that dovetails between policies” when more than one cover might apply.
In her previous life as a broker, she sought broad language on all policies to insure coverage overlaps that would provide a bulwark against any fact pattern that plaintiffs’ counsel might uncover.
For example, a medical malpractice policy could be triggered because of the way a physician was credentialed, but credentialing irregularities might provoke a lawsuit that would trigger a Directors’ and Officers’ policy.
Because general liability policies often have a lower retention than professional liability policies, insureds might prefer that general liability policies respond, Tapasak said.
The health care industry is “ripe” for batch claims, he said, because hospitals might unwittingly employ a rogue employee or take on exposure to downstream liability from defective or inadequately sterilized medical devices.
In the spate of batch claims, or “mass torts” of the late 1980s and 1990s, scores of defendant physicians were sued over alleged faulty products such as silicone breast implants, pedicle screws and the drug cocktail fen-phen, said Darryl K. Thomas, chief claims officer, HCPL, ProAssurance Corporation.
“The recent flurry of mass torts involves hundreds of plaintiffs suing one or only few physicians,” Thomas said. The recent litigation involving alleged unnecessary cardiac stenting is an example of the current trend. Mass torts often involve alleged intentional or even criminal acts, he said.
These suits are rare but spectacularly awful: the serial killer nurse, the gynecologist who surreptitiously photographs patients in compromised situations, or unnecessary surgeries.
“You want to make sure that you haven’t just hired the Angel of Death.” — Dr. Daniel J. Sullivan, president and CEO, The Sullivan Group
While insurance policies do not cover the offender for criminal activity, the allegations of negligent hiring often trigger coverage under a health care provider’s professional or general liability policy, said Kristin McMahon, president, U.S. liability and regulatory health care products, IronHealth.
Batch claims “are an emerging risk issue,” said Joanne Wayman, vice president, claims, Allied World, because attorneys attempt to maximize recovery by linking events.
The opioid epidemic has the potential to generate mass torts around the prescribing practices of some health care providers, Thomas said.
Crossover exposure between cyber risk and medical devices is another developing exposure.
“The walls around product liability and cyber liability will become a lot more blurred,” said Tapasak.
Ounce of Prevention
Proper credentialing of practitioners is essential for prevention, said Dr. Daniel J. Sullivan, president and CEO of The Sullivan Group.
“You want to make sure that you haven’t just hired the Angel of Death,” he said, referring to Charles Cullen, the nurse who confessed to 40 murders by toxic injection in 2003. He may have killed as many as 400.
In cases like Cullen’s, it’s not uncommon to discover afterward that colleagues suspected something was wrong, McMahon said. The growing model of “if you see something, say something” is moving the needle to a more forthcoming culture, but “progress takes time.”
Several mechanisms can help reduce exposure, such as a culture of safety that empowers whistleblowers to report suspect behavior anonymously or with impunity.
“Hospitals have robust risk management that educates staff, from the C-suite down, to make the facility a viable risk for the insurance market,” said Lane. “Compliance departments are more robust.”
IronHealth and other professional liability carriers encourage insureds to monitor their own electronic health records to identify and address outliers.
“For example, we want our insureds to ask, ‘Why is one of our spinal surgeons performing an unusually high number of procedures?’” McMahon said.
Allied World’s Meidl encourages risk managers to mine all the data they can find — their own facility’s data on procedures and outcomes as well as information published by the American Society for Healthcare Risk Management and other trade groups. “Read incident information from similar facilities,” she said. “Ask, ‘can this happen here?’ ” &
