Understanding Vicarious Liability Coverage
By Krista Mayes, ATP Program Director
Are you wondering about your clients’ professional liability coverage and how far it goes? One of the most misunderstood areas — and one where we consistently get questions from agents — is vicarious liability.
Vicarious liability is the part of a professional liability policy that covers a business in situations in which it could be held responsible for the errors and omissions of its employees, contractors or partners. This can include wrongdoings ranging from bodily injuries, improper supervision and even wrongful death.
Vicarious liability is a common risk for behavioral health businesses — and having robust professional liability insurance coverage in place is key to ensure oversights don’t impact their bottom line.
This coverage may seem simple enough, but here’s where confusion comes in that could lead to unfortunate insurance coverage gaps. Hospitals and other care facilities often utilize both full-time doctors and contracted physicians. Depending on the policy — and the insurance company with which you are working — contracted workers may not be covered, nor would vicarious liability coverage extend to acts by said contracted workers. In this instance, if a contracted physician makes a mistake, the business is on the hook for the associated costs in the event the business is also named in the lawsuit.
Here’s a scenario of how this could play out for one of your insureds. We insure “ABC Rehab” and they contract Dr. Smith to render professional services to their clients. Dr. Smith’s duties include prescribing medications. One day, a client experiences an adverse reaction to a medication Dr. Smith prescribed, which results in a lawsuit where both ABC Rehab and Dr. Smith are defendants. In this situation, our policy’s vicarious liability coverage will respond to defend ABC Rehab for the services provided by Dr. Smith, even if Dr. Smith is a contract worker rather than an employee.
An additional perspective within this scenario highlights another important question – what about Dr. Smith? When Dr. Smith’s contract with ABC Rehab started, ABC contacted their insurance agent and requested Dr. Smith’s addition to their professional liability policy. Dr. Smith has separate medical malpractice coverage in place, but it does not extend to any professional services rendered on behalf of ABC Rehab. Since Dr. Smith is a scheduled professional on the policy, our policy would also provide a defense to Dr. Smith individually in this lawsuit. Some carriers don’t offer the option to schedule contracted professionals like Dr. Smith, which forces these professionals to purchase another separate policy.
I’m proud to say that ATP is stronger than our competitors in this area — as we are one of the few programs in the country offering comprehensive vicarious liability coverage and primary coverage for both full-time and contracted professionals working for our insured behavioral health organizations.
Are your clients covered for the acts of their physicians? If you’re not sure or would like to learn more about vicarious liability, reach out to Krista Mayes, ATP Program Director, using the link below.