Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

Rancho Mesa’s insurance brokers specializing in healthcare, education and non-profit organizations continue to navigate the hardening insurance marketplace, characterized by tighter underwriting guidelines, reduced limits of liability, increased deductibles, and higher policy premiums.

One of the sectors most impacted by the hardening market is healthcare and its ability to attain adequate insurance protection, specifically sexual misconduct liability insurance. Continued claim activity, social inflation, third-party litigation financing, and the increased cost of litigation all contribute to the hardening market conditions.

Consider the following data points in order to understand why the market is hardening. Several states have recently removed barriers to reporting abuse. Only five states maintain a criminal statute of limitations on claims of abuse. Nineteen states have eliminated statutes of limitations on civil claims. And, 30 states have enacted laws allowing victims more flexibility to revive claims of sexual abuse.

Additionally, according to the Institute for Legal Reform, from 2016 to 2020 the tort system’s direct economic costs grew 6% every year, exceeding both the inflation rate and GDP. That means more and more cases are litigated each year.

Not only are the number of cases increasing, but a 2023 report titled “Medical Malpractice Claims-Made Social Inflation and Loss Development Report” indicates that claims exceeding $1,000,000 continue to grow in frequency. So, the number of claims are increasing as the cost of claims are increasing.

An increase in third-party litigation financing, the practice of investors funding lawsuits in exchange for a portion of the settlement and return on the investment, can discourage prompt and reasonable settlements. This practice also reduces an attorney’s accountability to good faith standards and produces more lawsuits.

Impact to Sexual Misconduct Coverage and Healthcare Providers

Insurance companies are now reducing their financial risk for abuse exposures. This means medical professional liability underwriters may need additional underwriting information to quote limits in excess of $100,000. Additional underwriting measures may include issuing non-renewals, considering jurisdictional challenges, careful consideration of policies covering young patients, excluding all trafficking allegations, and adding a per victim or perpetrator deductible.

Risk Management Strategies for Healthcare Providers

Healthcare organizations can help mitigate some of the risk by:

• Using chaperones to reassure patients of a procedure’s professional nature. The chaperone provides a witness to support the practitioner’s actions.

• Performing examinations for a minor in the presence of a parent, guardian, or chaperone.

• Educating the patient about the exam and its necessity prior to the patient’s appointment.

• Documenting the exam’s medical necessity, the education provided to the patient, and the chaperone’s identity.

• Maintaining boundaries by establishing proper practitioner-patient relationships.

• Educating staff on proper patient interactions, professional boundaries and reporting of misconduct.

• Ensuring familiarity with your state’s reporting obligations related to sexual misconduct and include the requirements in your policies and procedures.

The legal environment and claim trends add financial exposure for both healthcare providers and insurance companies. Rancho Mesa will continue to monitor these trends to better educate and advocate for clients. Please contact me at (619) 937-0175 or sbrown@ranchomesa.com to discuss possible insurance solutions.