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Avoiding risk means limiting your exposure

November 15, 2011
by Nick Zubko, Associate Editor
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Organizations need to know their policy, know their staff, and know what to do when things go wrong

No one wants to get sued. Of course, that includes mental health and addiction treatment facilities. But it does happen, which is why it's important for organizations to know what scenarios their insurance policies cover in case something does go wrong. 

Today, insurance companies are expected to do more than simply “slap together” a policy for a facility, according to Robert LaRocca, executive vice president of Sterling & Sterling Insurance, a Woodbury, N.Y.-based insurance broker.

“It requires a strong understanding of the business and the ability to craft a program that addresses the specific needs of each facility,” says LaRocca. “The policy itself is the last step; it's just a contract, a document that memorializes everything else.”

And, depending on the policy, “everything else” can range from general and professional liability to property, automobile, and workers compensation coverage. With employment practice liability (EPL), facilities also can protect themselves from allegations involving things like sexual harassment, discrimination, or wrongful termination.

“It's a matter of developing an understanding of what you do and what services you provide, which then helps you understand where your exposures lie,” he explains. “Then you can make sure that the policy has coverage in place for all the things that are insurable for your facility.”

Understanding your exposure

According to LaRocca, every insurance carrier has a “different appetite” for the kind of risks that they are willing to cover. For example, some will only accept “vicarious liability” for an organization, because they don't want to be directly exposed.

When dealing with mental health and addiction treatment facilities, it's important that brokers and carriers understand what makes your facility different. Most importantly, LaRocca says they need to understand “what exposures are inherent” in your organization.

“They should be a specialist in your area,” he explains. “That way, not only can they make sure the coverage you have is appropriate, but you can be confident that they're properly handling any claims you might encounter.”

Some policies cover the facility, doctors, staff, and everything in between. But depending on the policy, factors such as a doctor's credentials and employment status (for example, whether they work on a contract, part-time, or full-time basis) will determine if he or she requires individual insurance coverage.

Some carriers may cover only those doctors who are employed by the facility, while others may only cover psychiatrists or psychologists and exclude those classified as traditional MDs, such as primary care physicians.

“It depends on the policy,” LaRocca says. “Some policies cover doctors, some don't. But you definitely can't just assume that yours does.”

It's not uncommon for “insured” facilities, even longtime policyholders, to be informed that their doctors are excluded from coverage. In response, facilities often claim otherwise, saying that “our doctors are employed [by the facility],” he explains. The lesson: “You really need to make sure that the doctors are covered, too.”

Some of the more common scenarios for exposures to occur at treatment facilities include:

1. Sexual misconduct

One of the most common “improprieties” mental health and addiction treatment facilities face is when a doctor or professional engages in an inappropriate relationship with a client. While such encounters are often believed to be consensual, the clients involved are typically incapable of making those decisions.

In other cases, staff members other than doctors, such as floor monitors, security guards, orderlies, or maintenance personnel, have been accused of sexual abuse or molestation. For example, a client may allege that one of these people entered their room and touched them inappropriately.

“Sometimes [the allegations] are warranted, but other times they are products of people's imaginations,” explains LaRocca. “A client may have tried to have a romantic interlude, but the other person says ‘no, it's inappropriate,’ and it becomes hostile.”

2. Improper dismissal

Clients can leave a treatment facility whenever they want, but they can also be discharged at any time. Clients have made allegations that they were discharged early and not treated effectively, or dismissed unfairly as a result of misconduct.

“Clients have sued because they went into a program for six months, and ended up relapsing,” LaRocca explains. “Or, they were dismissed from a program and then sued because they got into a car accident after they were released. Those types of [allegations] can definitely happen.”

That's why it's important to have a clear set of rules in place that apply to everyone. If they are non-discriminatory and a client doesn't follow them, a facility has every right to discharge them at any time.

3. Cyber liability

“Cyber liability” refers to the exposure that occurs when facilities gather proprietary client information, such as credit cards and social security numbers.

“Whenever people give that information, they're exposed and can suffer financial loss,” says LaRocca. “If you accidentally send out a client's credit card information and they suffer damages as a result, you have to pay for it.”

As more stories are reported, facilities have grown concerned that it could happen to them. As a result, policies are being broadened to make sure those new exposures are covered.

“Those clauses are becoming more common in policies,” he adds. “The exposure has always existed, but you're seeing more policies being created to address it.”

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