Summary: In most territories, Insurance Services Office (ISO) offers two standard forms for hospital professional liability insurance. One form, designated PR 00 03 09 08, covers a hospital's liability for damages arising out of medical incidents that occur during the policy period. The other form, PR 00 04 09 08, the claims-made policy, covers medical incidents for which claim is first made against the insured and reported to the insurer during the policy period.
Apart from this difference, the two forms provide essentially the same scope of coverage. Each amounts to a combination of malpractice and products liability insurance, as each covers claims arising out of professional treatment as well as from medicines, food, appliances, etc., dispensed by the hospital. And, despite differences in phrasing, each covers essentially the same types of incidents, subject to the same exclusions. The pages that follow note some of the differences and the similarities between the forms.
Topics covered:
PR 00 03 insuring agreement
Exclusions
Supplementary payments
Persons insured
Limits of insurance
Conditions
Definitions
Claims-made coverage
PR 00 03 Insuring Agreement
a.We will pay those sums that the insured becomes legally obligated to pay as damages because of injury to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for injury to which this insurance does not apply. We may at our discretion investigate any “medical incident” and settle any claim or “suit” that may result. But:
(1)The amount we will pay for damages is limited as described in Section III—Limits of Insurance; and
(2)Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements.
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments.
b.This insurance applies to injury only if:
(1)The injury is caused by a “medical incident” that takes place in the “coverage territory”; and
(2)The injury occurs during the policy period.
(3)Prior to the policy period, no insured listed under Paragraph 1 of Section II – Who is An Insured and no “employee” authorized by you to give or receive notice of a “medical incident” or claim, knew that the injury had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy period, that the injury occurred, then any continuation, change or resumption of such injury during or after the policy period will be deemed to have been known prior to the policy period.
c.Injury which occurs during the policy period and was not, prior to the policy period, known to have occurred by any insured listed under Paragraph 1. of Section II – Who Is An Insured or any “employee” authorized by you to give or receive notice of a “medical incident” or claim, includes any continuation, change or resumption of that injury after the end of the policy period.
d.Injury will be deemed to have been known to have occurred at the earliest time when any insured listed under Paragraph 1. of Section II – Who Is An Insured or any “employee” authorized by you to give or receive notice of a “medical incident” or claim:
(1)Reports all, or any part, of the injury to us or any other insurer;
(2)Receives a written or verbal demand or claim for damages because of the injury; or
(3)Becomes aware by any other means that injury has occurred or has begun to occur.
Analysis
The key term upon which the insuring agreement rests is “medical incident.” This is a defined term that basically deals with the professional acts or omissions of the insured. Form PR 00 03 09 08 covers medical incidents that occur during the policy period, so this is an occurrence type policy similar to the commercial general liability coverage form, CG 00 01 04 13.
Specifically, the form defines “medical incident” as follows:
8.”Medical incident” means any act or omission:
a.in the providing of or failure to provide professional health care services to your patients, including:
(1)The providing or dispensing of food, beverages, medications or medical supplies or appliances in connection with such services; and
(2)The handling or treatment of dead bodies, including autopsies, organ donation or other procedures.
b.Arising out of the service by any person as a:
(1)Members of a formal accreditation, standards review or equivalent professional board or committee of the Named Insured; or
(2)Person charged with executing the directives of such board or committee.
The insuring clause in PR 00 03 refers simply to “damages because of injury”; it is not restricted to “bodily injury.” So, depending upon the circumstances, the insuring clause is broad enough to cover liability for damage to property of others and also claims based upon mental suffering, false imprisonment, slander, libel, invasion of privacy, or the like. Of course, to be covered, liability must be based upon professional acts as covered in the definition of “medical incident.”
The insuring agreement also allows the insurer to settle claims or suits without first obtaining the insured's permission. The older hospital professional liability form, in the tradition of malpractice insurance, provided that the insurance company would not settle any claim except with the written consent of the insured. This has changed. Regardless, few insureds would refuse permission because refusal could expose the insured to personal liability. Many malpractice forms that required permission had a “hammer” clause that allowed the insurer to compel the insured to take over the case if it refused permission to settle.
The hospital professional liability claims-made coverage form, PR 00 04 09 08, has a similar insuring agreement but adds the claims-made language requiring a claim for damages to be made against the insured during the policy period. For more information on claims-made policies, see Claims-Made CGL Form.
This insurance does not apply to:
a.Criminal Acts
Injury arising out of a criminal act, including but not limited to sexual abuse or molestation or fraud, committed by or at the direction of the insured.
b.Contractual Liability
Injury for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages that the Insured would have in the absence of the contract or agreement.
c.Violation of an Antitrust Law
Any claim for damages arising out of the violation of an antitrust law.
d.Workers Compensation and Similar Laws
Any obligation of the insured under a workers compensation, disability benefits or unemployment compensation law or any similar law.
e.Employers Liability
”Bodily injury” to:
(1)an “employee” of the insured arising out of and in the course of:
(a)Employment by the insured; or
(b)Performing duties related to the conduct of the insured's business; or
(2)The spouse, child, parent, brother or sister of that “employee” as a consequence of Paragraph (1) above.
This exclusion applies whether the insured may be liable as an employer or in any other capacity and to any obligations to share damages with or repay someone else who must pay damages because of the injury.
f.Aircraft, Auto, or Watercraft
Injury arising out of the ownership, maintenance, use, or entrustment to others of any aircraft, “auto” or watercraft. Use includes operation and loading or unloading.
This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the “medical incident” which caused the injury involved the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft that is owned or operated by or rented or loaned to any insured.
However, this exclusion does not apply to loading or unloading of patients from any “ambulance”.
g.War
Injury, however caused, arising, directly or indirectly, out of:
(1)War, including undeclared or civil war;
(2)Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or
(3)Insurrection, rebellion, revolution, usurped power or action taken by governmental authority in hindering or defending against any of these.
Analysis
The hospital professional liability contract has the usual exclusion of liability for injury to employees in the course of their employment and of any workers compensation, unemployment compensation, disability benefits, or similar statutory payments for which the insured or any of its insurers may be liable. PR 00 03 is not meant to be a workers compensation policy or a health or disability insurance policy.
There is also an exclusion of liability arising out of the ownership, maintenance, use, loading, or unloading of any auto, aircraft, or watercraft. This exclusion is not intended to eliminate coverage for medical treatment given a person in an ambulance or other vehicle. Should an injury occur under that circumstance, that injury arose out of the furnishing of professional health care and is meant to be covered under PR 00 03; the injury did not result from the ownership or use of the motor vehicle. There is a clear distinction to be conveyed here. Furthermore, the coverage form makes a point of declaring that the auto exclusion does not apply to loading or unloading of patients from an ambulance. Since an ambulance is so closely associated with the professional work of a hospital, it makes sense for a hospital professional liability policy to apply to injuries that may arise around the use of an ambulance.
The criminal acts exclusion's wording means that the coverage form will not apply to injuries that arise out of the insured's violation of penal laws. The criminal acts exclusion is a general exclusion in that it speaks of “a criminal act, including but not limited to …”; so, the items mentioned in the exclusion serve mainly as examples of acts that are not covered by PR 00 03. This exclusion is meant to take the place of the expected or intended injury exclusion that is usually found on general liability policies. The expected or intended injury exclusion is not on PR 00 03 because the hospital professional liability coverage form can apply to intentional acts, that is, intentional health care services, and so, an intentional act exclusion would convert PR 00 03 into an illusory coverage form.
Many jurisdictions have addressed the meaning of the intentional or criminal acts exclusion and have found it unambiguous and providing an objective standard such as in Stinson v. Allstate Ins. Co., 441 S.E.2d 453 (Ga.Ct.App.1994). If consequences of the criminal act are foreseeable by a reasonable person, as opposed to the insured, coverage for injury is barred. Insurance companies are free to enter into contracts with their insureds, which must be enforced according to their terms. Unlike automobile policies, no public policy requires homeowners to carry homeowners insurance or carriers to provide the full panoply of coverage under homeowners policies. The court in Central Mut. Ins. Co. v. Tracy's Treasures, Inc., 19 N.E.3d 1100 (Ill. App. 2014) noted there was no public policy requirement that those who advertise their business through electronic transmissions must carry liability insurance to cover claims. No identifiable public policy prevents an insurer from refusing to insure the risk of bodily injury reasonably expected as a result of an insured's criminally reckless acts, as seen in Allstate Indem. Co. v. Hieber, No. 1-13-2557, 2014 WL 7185997 (Ill. App. Dec. 17, 2014).
The court in Country Mut. Ins. Co. v. Orloske, No. 14-cv-1343 (PAM/TNL), 2014 WL 7214834 (D. Minn. Dec. 17, 2014) stated that the criminal-acts exclusion unambiguously precludes coverage for bodily injury due to an act that is criminal in nature, even if the actor is never charged with or convicted of a crime and even if the actor did not subjectively intend the resulting bodily injury.
Note that the contractual liability exclusion does not mention an insured contract exception. “Insured contract” is not a term that is found on PR 00 03.
The antitrust law exclusion speaks for itself and is probably placed on this form due to hospitals merging together and contracting with each other for various services, usually due to financial reasons. Anticompetitive acts by the insured that may cause someone to suffer an injury are simply not something that the insurer wants to cover.
Finally, there is an exclusion for injury, however caused, arising out of any sort of war-related activity.
Note that there is no exclusion of liability for damage to property in care, custody, or control of the insured. However, hospital professional liability insurance is not intended to provide the equivalent of innkeepers liability insurance. It does not cover, for example, liability for loss of personal effects of a patient, unless the loss can be traced to professional health care services.
Hospital professional coverage has no exclusion of liability for damage to the named insured's products, arising out of such products or any part of such products. Thus, PR 00 03 apparently covers liability of the hospital to repair or replace a brace, artificial limb, or other appliance sold by the hospital and that turns out to have been defectively constructed or adjusted.
These supplementary payments are similar to those found on the CGL form; see General Provisions of the CGL. The only difference is that PR 00 03 does not mention a payment for the cost of bail bonds required because of accidents or traffic law violations. The supplementary payments do not reduce the limits of insurance.
The insureds under PR 00 03 are similar to those found on the CGL form; see General Provisions of the CGL. Individuals, partnerships, joint ventures, limited liability companies, organizations, executive officers, and employees are all listed as insureds under the terms of PR 00 03.
The persons insured provision of the medical incident forms states that coverage applies to the liability of any executive officer, hospital administrator, stockholder, or member of the board of trustees, directors, or governors of the named insured while acting within the scope of that person's duties as such. The portion of the provision that is emphasized here makes it clear that an executive officer who is also a practitioner at the hospital is only an insured while acting within the scope of his duties as an executive officer. He would still need his own professional liability coverage to insure personal liability arising out of his practice of medicine.
The limits of insurance section of PR 00 03 closely mirrors that found on the CGL form; see General Provisions of the CGL. The limits of insurance shown in the declarations fix the most that the insurer will pay regardless of the number of insureds, claims or lawsuits, or persons making claims against the insured. The aggregate limit is the most that the insurer will pay for the sum of all damages because of injury. Subject to the “aggregate” provision, the total liability of the company for all damages because of all injury arising out of any one medical incident shall not exceed the limit of liability stated in the declarations as applicable to “each medical incident.”
Note the “each medical incident” limit; this is as opposed to “each claim.” If, as frequently happens, the hospital is sued by a patient and separately by the spouse or a relative of the patient for recompense for care, loss of services, or loss of consortium, the limit per claim language might make the limit apply separately to each suit and to any judgment that might be obtained in each suit. The “each medical incident” language makes clear that coverage under the hospital professional liability policy should be limited to damages claimed by a person injured directly through a medical incident. Consequential damages are available only if they are a direct result of a “medical incident.” The definition is not sufficiently clear to limit the injury to the patient alone, and if a person suffers injury as a result of a “medical incident,” coverage might apply because the definition does not limit the persons injured by a “medical incident.”
In Lexington Ins. Co. v. Lexington Healthcare Group, Inc., 84 A.3d 1167 (Conn. 2014), the court concluded that the phrase “related medical incidents” does not clearly and unambiguously encompass incidents in which multiple losses are suffered by multiple people, when each loss has been caused by a unique set of negligent acts, errors, or omissions by the insured, even though there may be a common precipitating factor. The court concluded that the acts, errors, or omissions underlying the individual defendants' claims against Lexington Healthcare were not related medical incidents under the terms of the policy. As a result, the court allowed that a separate per medical incident coverage limit applied to each individual defendant's claim.
In West Virginia Mut. Ins. Co. v. Adkins, 764 S.E.2d 757 (W.V. 2014), medical malpractice insurance coverage for medical corporation existed under the policy in place when the malpractice incidents were reported and did not include coverage under multiple prior policy periods. The policy was a claims-made medical malpractice policy; the “policy period” was defined by the policy declarations, which stated the start and end date of a 365 days policy period; the policy limit language provided that the “annual aggregate” was the limit of insurer's liability resulting from all “covered medical incident(s) during the policy period,” and thus did not require application of aggregate limits of insurance for the policy period when the incidents actually occurred; and no language in the policy allowed the resurrection of prior policy periods, which had long-ago expired by their very terms.
The conditions that are on PR 00 03 are similar to the ones found on the CGL form; see General Provisions of the CGL: bankruptcy, duties in the event of a claim, legal action against the insurer, other insurance, audit, representations, separation of insureds, transfer of rights of recovery, when the insurer does not renew. One thing to note here is that the professional liability coverage is stated to be primary coverage; there is no provision for excess coverage. If there is other valid and collectible insurance available to the insured, PR 00 03 is still primary in coverage, but will share with that other insurance on an equal share basis or on a pro-rata basis.
The definitions section of PR 00 03 has some of the same definitions that appear on the CGL form; see Commercial General Liability Definitions. However, PR 00 03 does not contain definitions for “insured contract,” “hostile fire,” “impaired property,” “loading or unloading,” “occurrence,” “personal and advertising injury,” “advertisement,” “pollutants,”, “products-completed operations hazard,” “property damage,” “your product,” or “your work.” These terms either do not appear in the body of the hospital professional liability coverage form or do not have any relevance to the coverage that is offered by PR 00 03. There are two terms that the hospital professional liability coverage form does define that do not appear on the CGL form: ambulance and medical incident. Both terms are obviously relevant to the coverage provided by PR 00 03.
1.”Ambulance” means any aircraft, “auto”, or watercraft equipped for transporting the sick or injured.
Analysis
This definition has to be read in conjunction with the aircraft, auto, or watercraft exclusion. There is no coverage under PR 00 03 for injuries arising out of the use, ownership, or maintenance of these vehicles; the insured would need a business auto coverage form for that purpose. However, that exclusion does have an exception for injuries arising out of the loading or unloading of patients from any ambulance. So, for example, if the sick or injured are being transported in any (owned or nonowned) aircraft, auto, or watercraft and are injured when the ambulance crashes or as a result of the patient being dropped while being loaded into or unloaded from such a vehicle, the insured has liability coverage under PR 00 03.
There may be a problem over the use of the phrase “equipped for transporting the sick or injured”. Does this mean the aircraft or auto has to be professionally furnished for its particular services in order for the definition to be applicable? For example, if an employee of the hospital is asked to transport an injured patient to the insured hospital in the employee's car, and the employee drops the patient while unloading her from his car at the entrance to the hospital's emergency ward, can the insurer deny coverage for a claim because the employee's car was not technically equipped as an ambulance is? Possibly, but with extreme care. Since the phrase could be construed to be ambiguous, any vehicle carrying the sick or injured that results in further injury could be covered. The facts and policy wording should be reviewed by competent coverage counsel before a decision is made to reject coverage because the phrase “equipped for transporting” is not itself defined on PR 00 03, the phrase has to be given its ordinary, reasonable man interpretation. If it is reasonable for an employee to consider his auto as “equipped for transporting” if the car has seats or a place for the patient to lie down, and if the insurer had wanted an ambulance to mean only technically, professionally equipped vehicles, it could have stated that in the definition.
8.”Medical incident” means any act or omission:
a.in the providing of or failure to provide professional health care services to your patients, including:
(1)The providing or dispensing of food, beverages, medications or medical supplies or appliances in connection with such services; and
(2)The handling or treatment of dead bodies, including autopsies, organ donation or other procedures.
b. Arising out of the service by any person as a:
(1) Members of a formal accreditation, standards review or equivalent professional board or committee of the Named Insured; or
(2)Person charged with executing the directives of such board or committee.
Analysis
The definition of medical incident is very broad and all-inclusive since it includes “any act or omission” in the furnishing of professional health care services. Since the form does not complement the definition by adding a meaning for “professional health care services,” coverage under the insuring agreement based on a medical incident can be subject to different interpretations. The insurer may be content that it knows what professional health care services encompass, but the lack of a certain definition subjects coverage to judicial interpretation, based on a case by case set of facts.
Based on this definition, the insuring agreement of PR 00 03 specifically covers liability from furnishing food, beverages, medications, or appliances in connection with professional services; this basically provides products liability coverage as to products connected with professional services. Note that liability for food served to patients is clearly covered based on the reference to “professional services”. On the other hand, liability for food served to relatives, visitors, and other members of the public in a hospital restaurant or cafeteria is not covered, as that activity should not qualify as professional services. Neither is there coverage for liability arising out of products sold in a gift shop or other store maintained by or for the hospital. Liability for such products should be insured separately or, preferably, under general liability insurance written in connection with hospital professional coverage.
The last part of the definition deals with administrative acts or omissions that lead to claims for damages against the insured. For example, if the insured hospital is sued by a physician who charges that his reputation has been injured by being refused staff privileges on the advice of the hospital's accreditation committee, PR 00 03 is designed to provide the insured with coverage. This part of the medical incident definition shows, again, that the insuring agreement, dealing as it does with “injury … caused by a medical incident” applies not just to bodily injury and property damage, but also to any type of “injury.”
The claims-made version of hospital professional liability coverage is offered through PR 00 04. The wording of PR 00 04 is similar to that found on PR 00 03 except for the claims-made terminology, such as “first made,” “retroactive date,” and “extended reporting period.” For more information on claims-made type coverage, see Claims-Made CGL Form.