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Physician-Owned Insurance Company Offers Higher Malpractice Coverage

Policies covering claims up to $1 million to be sold through Colonial Insurance Agency


November 13, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

There has been talk in the past year of finding alternatives to the tight market for malpractice insurance, and now a group of physicians is on its way to getting one alternative off the ground.

What the group has done is create the Puerto Rico Medical Defense Mutual Insurance Co., which will provide malpractice insurance of up to $1 million per claim and $3 million per year to local physicians who meet strict guidelines. The insurance will be sold through Colonial Insurance Agency Inc., a property and casualty insurance agency with $60 million in annual premiums and high hopes that this new account can boost the sale of other insurance products, said Colonial Vice President Gloria J. Benitez.

There are fewer insurers offering higher malpractice coverage because of the numerous liability suits filed each year and the mounting jury awards, which drive up premiums. The Medical Malpractice Insurers Syndicate (Simed by its Spanish acronym) is required by law to cover any hospital or physician who requests malpractice coverage, but its limit is $100,000 per claim or $300,000 per year.

Benitez said Colonial decided to represent Medical Defense Mutual not only because the island’s healthcare industry badly needs this type of coverage, but also because it gives Colonial the opportunity to sell physicians other kinds of insurance such as commercial and personal lines. "If a doctor is good for the malpractice coverage, then he [or she] is a good risk for other insurance," she said.

According to Benitez, Medical Defense Mutual is in the process of enrolling physicians and hospitals; it is reviewing 100 applications out of 500 that have been distributed. Chairman Charles Juarbe, an otolaryngologist (ear, nose, and throat specialist), was off the island and couldn’t be reached for comment.

The company needs to sell $3 million worth of policies to cover the minimum capitalization in its application to the Insurance Commissioner’s Office, even though the Insurance Code requires a minimum capitalization of only $900,000 for this type of operation. Under a solicitation permit approved by the commissioner earlier this year, Medical Defense Mutual has two years to meet its goal.

Benitez said Medical Defense Mutual chose to go with the higher capitalization to be on the safe side. She said the investment will help pay for reinsurance—75% of premiums subscribed will be reinsured through Lloyd’s of London—and cover operational costs. Medical Defense Mutual is currently working out of Colonial’s Hato Rey office while it scouts for a permanent location.

The success of Medical Defense Mutual will depend on its ensuring that the physicians it covers are good risks. There are between 8,000 and 10,000 physicians in Puerto Rico and, according to Benitez, about 1% account for a large number of malpractice suits.

She said Colonial and a panel of three to five physicians from various specialties will review each application for malpractice insurance, paying close attention to the physician’s professional record, board certification, and hospital privileges. Those with a record of claims losses, who have been sued repeatedly for the same reason, or who have been found negligent needn’t apply.

Benitez stressed, however, that the number of suits filed against a physician shouldn’t be a reason for automatic disqualification, since many lawsuits are frivolous. More important is the reason behind those lawsuits and whether the physician was negligent. She said, "Our insurance is only for the good doctor."

This Caribbean Business article appears courtesy of Casiano Communications.
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