David Shaffer is the vice president of Insurance Office of America's Professional Medical Healthcare Division, which provides the most comprehensive medical spa insurance to members of the American Med Spa Association (AmSpa). He has been working in the medical professional liability insurance field since 1996, where he uses his unique combination of underwriting expertise and broker knowledge to assist medical aesthetic facilities, medical spas, hospitals, healthcare facilities, physicians and physician groups with their insurance needs. In addition to medical professional liability, Shaffer also has the ability to assist clients with other insurance needs, such as employment practice liability, directors and officers, business office packages, workers compensation and various other lines of coverage customary to the healthcare industry. To learn more about AmSpa and Insurance Office of America, call 312-981-0993 or log on to www.americanmedspa.org.
Medical spa insurance claims and their outcomes run the gamut of relatively mundane to extremely severe, depending entirely on their circumstances. As they say, the devil is in the details and, although there are some commonalities that exist between many claims, there is no clear comparison when it comes to common claims, common defendants, and common pricing or insurability responses to claim activity.
A CLAIM EXAMPLE
All claims are heavily influenced by the circumstances surrounding the alleged negligence. By that, I mean you may have two claims with comparable allegations with entirely different outcomes. Consider the following example.
A regular medical spa patient returns to ABC Medical Spa for a third round of laser treatments. In this instance, the services were provided by a certified electrologist. Prior to commencing treatments, the patient's chart was referenced and the same laser settings that were used successfully during the two earlier treatments were also used for the third. Following the treatment, the patient displayed visible epidermal burns to the face. Ice was applied, and anti-inflammatory, antibacterial and anti-viral medications were all given to the patient. Over time, the patient's burns mostly healed.
A claim was filed and discovery began. As the claim details unfolded, it was determined that the electrologist was appropriately trained, and that all of the established protocols were followed—including the patient signing a consent form stating burns were a possible complication of the treatment. Considering this, you may think that this incident couldn't have resulted in any negative outcome against the medical spa. However, if you look at little deeper, there are critical elements to the claim that impacted the final outcome.
Within the demand letter from the patient's attorney, indemnification was being sought for medical bills, a month's repayment of salary and damages for facial burns. Although these are considered “typical” elements of a demand letter, what makes this situation unusual is the patient's type of employment. This particular patient worked as a model and, because of the location of the burns, the patient was unable to secure work until the burns had faded significantly.
“Remember, even if you believe that your practice sets the industry benchmark for training and safety, negative outcomes can and do occur.”
Even with the electrologist presumably doing everything correctly and with the burn healing significantly, the claim settled for a $130,000, along with an additional $10,000 in legal fees.
A $130,000 settlement is significant for a laser burn. Outcomes of this type used to be more common several years ago; however, advancements in today's laser technology seem to have greatly reduced the potential for severe burning. Today, many laser burn claims resolve for less than $50,000. In fact, the majority settle for less.
By now, you may be wondering if this claim resulted in this facility's nonrenewal? Fortunately, it did not! During the insured's renewal review, the underwriter took into consideration that adequate training was held, appropriate supervision was provided, and all of the policies and procedures were in place and followed. Because of the large settlement, it was determined that a surcharge would be incorporated into the insured's premium.
THE IMPACT OF CLAIM ACTIVITY
So, was this facility lucky to have retained their coverage? Perhaps. Every insurance company's underwriting guidelines are different. On top of that, each underwriter's evaluation of the situation could be different. Generally speaking, these are points to keep in mind that may help determine how your policy may be impacted because of claims activity.
With most insurers, claims/incidents that close with $0 settlements or jury awards will not have an impact on future premiums and won't result in a nonrenewal of coverage. What is important to remember is that all reported claims/incidents are still reviewed. If underwriting identifies a trend with a specific procedure, a particular staff member or if an excessive number of claims/incidents are reported, action may be taken. In underwriting's assessment, without proactive action by the insured to prevent future claims/ incidents, it is only a matter of time before a negative outcome will result.
When claims with indemnification are noted, underwriting commonly elects to take one or more of the following actions.
- Allow coverage to continue without impact.
- Impose a surcharge to the policy's premium.
- Increase the deductible applicable to the policy.
- Restrict coverage (i.e., specifically exclude a problematic procedure).
- Terminate coverage.
The amount of indemnification and/or the expenses paid during defense will also influence underwriting's decision.
Given this information, what can you do to help prevent or minimize claims activity at your medical aesthetic facility? You have to be defensible. This may seem simplistic and basic, but it can completely change the outcome of a claim when filed. Throughout the year, make every effort to ensure your staff remains adequately trained, and that they follow your established policies and procedures. Additionally, your policies, procedures and consents should be reviewed and updated annually to confirm that the actions taken within your office are commonly acceptable within the industry. You also need to be aware of changes or potential changes occurring with the laws governing your profession and adjust your practice accordingly.
Remember, even if you believe that your practice sets the industry benchmark for training and safety, negative outcomes can and do occur. Making yourself defensible by taking just a few simple, yet critical steps will most certainly improve your position as a defendant.