Professional Liability Insurance: A Short Primer

Article excerpt

RISK MANAGEMENT & CQI

Frank made a mistake. When the pharmacy's summer employee, a first-year pharmacy student, complained of a headache, he gave her an Rx-OnIy drug. She eventually had to go home. Over the next few days, her health deteriorated and she was hospitalized.

Her doctor gave the opinion the student had an unusual but known reaction to the drug Frank gave her. Faced with hospital and medical bills, and under pressure from their health insurance company, the student and her family sued the pharmacy and Frank.

Both the pharmacy and Frank carried professional liability policies that contained language similar to the following:

"We" [insurance company] do not pay for "property damage" arising out of... a willful violation of a regulation or statute relating to "pharmacy services"; or ...a violation of criminal or penal statute or a criminal act...

Frank had willfully violated the law, so his policy did not cover him. The pharmacy argued that it did not "willfully" violate the law and that its employee was not authorized to do so. The pharmacy's insurance company decided, although it had reservations, to cover the damages for the pharmacy, and the lawsuit was settled.

Every pharmacy professional liability insurance policy, corporate and individual, contains a list of definitions, conditions, and exclusions. For example, a policy that specifically covers "compounding" excludes "manufacturing."

The pharmacy and pharmacist employees need to know how the insurance company defines each term, and they need to be certain that its practices are within the policies' definitions.

Individual professional liability policies are designed to cover only the pharmacist insured. Individual policies are usually written as secondary policies, which provide coverage after the pharmacy's policy exhausts its coverage amount or refuses to cover the pharmacist. The advantage of this arrangement is that the defenses tend to be more coordinated.

Pharmacy owners and employees assume the pharmacy's professional policy covers the acts of employed pharmacists and pharmacy technicians acting "within the scope of their professional duties." Usually they are conect, but not always. The following language under the definition of who is "an insured" is not uncommon:

None of [the pharmacy's] "employees" are "insureds " ...for [injuries] ariäng out of his or her rendering or failure to render professional health care services.

If such language is present, pharmacists and owners need to be certain there is an endorsement to the insurance policy that changes or modifies this rule. …