Let’s admit it: Insurance pricing can be a pain. It involves taking your limited time to address a future-loss contingency that might or might not ever happen. Then you have to price the value of that contingency against start-up capitalization, monthly overhead and a very real desire to have some money left to take home at the end of the month.
These factors drive many market buyers to the “basic-coverage- for-the-least-amount” approach. That approach works fine, as long as you don’t have a loss. The “budget basement” option is almost always a bad choice when you discover that your loss has “slipped” into a coverage gap, leaving the clinic—or worse, you personally, as the clinic owner—on the hook for cost of legal defense and damages. Thus, it’s definitely worth your time to approach your insurance shopping mindfully, deliberately, responsibly and with an eye to benefit versus cost.
Know Your Coverage Options
There are no standard templates for what types of coverage are needed for a veterinary practice. Requirements will vary from state to state and practice to practice. Each plan depends on the type and size of your practice; who and how many people you employ; whether your practice is stationary (in buildings), mobile or both; your analysis of exposure risks and likelihood of those risks; and your own perception of price versus comfort. At a minimum, you should understand and consider the following coverage types.
Basic Business Coverages The AVMA website provides a vast number of insurance resources for the practitioner. Take a minute to look over these resources, including the AVMA’s various insurance options, and understand what each of the coverage categories provides. Don’t just stop with the AVMA—there are many insurance providers easily located on the web that specialize in veterinary coverages. Don’t be ashamed to shop for competitive prices, but be sure you know what you’re shopping for.
Basic business coverages typically include the following option categories:
Health, Medical and Life Insurance: These plans, which follow the owners and the employees, typically include options such as life insurance, disability income, hospital indemnity and coverage of professional overhead expense in the event of a death or incapacity. Owners should consider “Key Man” policies, i.e., those policies covering the owners in an amount sufficient to either buy out that owner’s interest or keep the practice going in the event of that owner’s incapacity or death.
General Business Coverages: These coverages include Workers’ Compensation, which might or might not be mandatory, based upon your domicile state; employment practices liability; flood; commercial auto; builder’s risk; data breach; employee dishonesty and crime; umbrella liability; event liability or cancellation; and director’s/officer’s liability coverage. Be sure to discuss whether you utilize a large percent of students in your facility and how that might impact your coverage needs.
Each of the above represent potential “stand-alone” options, so it’s critically important that you work with your insurance professional to understand what is offered and what your practice requires.
Property coverages represent an entire smorgasbord of options, including building, business, personal property and inventory; business interruption; spoilage or contamination; outdoor signs; exterior building glass; credit card damages; water backup and overflow; loss of business income; mechanical breakdown coverage; fine arts; data breach and cyber liability.
Additional coverages are required to insure business vehicles or mobile veterinary clinics. Check on the status of Hazardous Waste disposal coverage. Finally, be sure you understand what constitutes “packaged” versus “standalone” options.
General Liability: General liability covers a business’ exposure to claims for bodily injury, personal injury and property damage caused by the business’ operations, products or injury that occurs on the business’ premises. For example, if in your parking lot your mobile veterinary clinic backs into a client bringing his or her dog in for vaccinations, your general liability policy would typically cover injury to the client (personal injury) and injury to the dog (property damage).
Professional Liability (Malpractice or Errors and Omissions Coverage): Many professional services and products create exposures that don’t involve personal injury or property damage.
Professional liability coverage differs from general liability in that it focuses on the insured’s alleged failure to perform on the part of, financial loss caused by, and/or error or omission in the service or product sold or provided by the policyholder. For example, professional liability insurance covers those damages arising from the insured’s negligence, misrepresentations, violations of good faith and fair dealing, and inaccurate advice.
Recognize that various states require certain professions—such as legal, medical and veterinary—to carry professional liability insurance. You can verify your state’s status by checking with your state VMA Board.
Care, Custody and Control: If your animal patients remain in your care— either through boarding, hospitalization or transportation—you require additional Care, Custody and Control insurance. This differs from professional and general liability coverage in that it applies to injuries to an animal in your care which is not directly related to the treatment. This would include injury or loss from fire, wind, attack from other animals, vandalism, theft, etc.
Cost of Defense: Most of these coverages also provide “cost of defense” options. Given the rising costs of legal representation, this defense option is key and typically well worth the cost. Attorney fees can easily run from $10,000 to hundreds of thousands of dollars defending a claim.
Defense coverage means the policy limits cover both the cost of insurance defense of the claim, with the attorney typically hired by the insurer, as well as the cost of damages ultimately awarded by either a court or a settlement between the parties, but only to the limits of the policy.
Manage Your Buying Analysis
With all of the options above, which do not cover all of the available insurance coverages, analysis can be overwhelming. Here are some tips on how to manage the process:
Create a summary sheet of your practice’s primary operations and the status of all persons involved in same.
Highlight those areas you believe to be the major risk exposures.
Understand the difference between a “claims made” versus an “occurrence” policy and pricing related to each. “Claims made” means insurance coverage is determined by the policy in effect the date the claim is made and is typically less expensive. “Occurrence” policies mean insurance coverage is determined by whether the policy existed at the time the occurrence happened, regardless of when the claim is made. As it expands the exposure timeframe for liability, “occurrence made” policies are more expensive, but make sense for those practices that have more open-ended liability exposure or for practitioners who are leaving the practice, but still have exposure during the statute of limitations timeframe.
Schedule a meeting with a well-respected insurance advisor or agent to review your planning sheet and to complete an application for quote
Be sure to identify all of your activities on the application. Failure to identify an activity typically voids coverage for damages rising from that activity.
Understand the concept of “riders” and what they are. A “rider” is an addon provision to the basic policy that provides additional benefits at an extra cost.
Because standard policies are restricted to basic terms and conditions, the parties cannot “bargain” modifications. The rider permits policies to be expanded or better customized.
Ask your agent for a copy of the available riders to any policy. The rider list is the best tool to identify coverages you’d assume were part of the basic package but are not. A “rider review” often succinctly identifies potential coverage gaps and allows you to make a meaningful evaluation of whether the extra coverage is worth the extra price.
Keep your insurance updated as your practice changes year to year.
Finally, be sensible about your cost/ value analysis. Remember, the cost of your coverage must always be weighed against your peace of mind when that claim is filed against you and your practice. Not if—but when —that happens, a well-drafted comprehensive insurance plan will prove to be the best money you’ve ever spent.
Denise E. Farris practices equine, insurance and veterinary law in the Kansas City, Kansas, area. “AV” rated in Martindale-Hubbell, she has been named in “Best of the Bar,” “SuperLawyers,” “Preeminent Women Lawyers,” “Top 100 Lawyers Kansas,” “Top 50 Female Lawyers Kansas” and EQUUS magazine’s “Leaders in Equine Law.” In addition to writing numerous articles, Denise has been a featured speaker at local, state and national symposiums, including the National Equine Law Practitioner’s Conference, the AAEP Hambletonian Conference, the National Farrier’s Convention, the National Multiple Trail Users Conflict Symposium and the North American Trail Ride Conference. She is an avid equestrian who competes in endurance and competitive trail riding events.
DISCLAIMER: This article provides general coverage of its subject area. It’s provided free, with the understanding that the author, publisher and/or publication do not intend this article to be viewed as rendering legal advice or service. If legal advice is sought or required, the services of a competent professional should be sought. The author and publisher shall not be responsible for any damages resulting from any error, inaccuracy or omission contained in this publication.