14.3 Health Care Providers

• Library: Insurance Law in Virginia (Virginia CLE) (2020 Ed.)

14.3 HEALTH CARE PROVIDERS

14.301 Contents of the Policy.

A. In General. Medical malpractice insurance is a contract that imposes legal obligations on both the insured health care provider and the malpractice insurance carrier. The malpractice carrier assumes certain risks for the health care provider in consideration of the policy premium. Generally, policies contain the following provisions.

B. Notice of an Occurrence. When the insured becomes aware of an injury or death that has resulted from acts covered by the health care provider's policy, the insured must notify the carrier promptly. Specifications of the notice are included in the policy.

C. Notice of a Claim. When the insured receives notice that a claim has been made or suit filed, he or she must notify the insurer promptly. This enables the insurer to investigate the facts of the claim or suit.

D. Duty to Cooperate. Most policies require that the insured health care provider cooperate with the insurer in providing a defense to a claim or in seeking a settlement or other resolution.

E. Consent to Settle. Some policies require that the insurer obtain the insured's consent before entering into a compromise settlement of a claim or suit filed against the health care provider.

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F. Other Insurance. If the insured health care provider has more than one applicable insurance policy, he or she must notify the insurer so that each insurer may pay the appropriate portion of the claim.

G. Assignment. The obligations and protections in the contract may not be transferred without the insurance carrier's consent.

H. Subrogation. When a malpractice carrier makes a payment on behalf of its insured under the policy, the insurer is the beneficiary of all the rights of recovery the insured has against any other individual or entity who may have also been negligent.

I. Changes to the Policy. The insured health care provider cannot make changes to the policy without the written consent of the insurer.

J. Cancellation. The cancellation clause sets forth the terms and conditions of cancellation. The clause applies to both the insured and the insurer. Written notice is generally required, but the insured health care provider's failure to comply with any material term of the policy may result in cancellation of coverage and possible nonpayment of a claim by the insurance carrier. Because a policy of insurance is a legal contract, failure to meet the terms and conditions of the policy may result in a breach of that contract and loss of coverage. ⁸⁸

14.302 Who Is Covered.

A. "Health Care Provider" Defined. In Virginia, a "health care provider" is defined as

(i) a person, corporation, facility or institution licensed by this Commonwealth to provide health care or professional services as a physician or hospital, dentist, pharmacist, registered nurse or licensed practical nurse or a person who holds a multistate privilege to practice such nursing under the Nurse Licensure Compact, nurse practitioner, optometrist, podiatrist, physician

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assistant, chiropractor, physical therapist, physical therapy assistant, clinical psychologist, clinical social worker, professional counselor, licensed marriage and family therapist, licensed dental hygienist, health maintenance organization, or emergency medical care attendant or technician who provides services on a fee basis; (ii) a professional corporation, all of whose shareholders or members are so licensed; (iii) a partnership, all of whose partners are so licensed; (iv) a nursing home . . . ; (v) a professional limited liability company . . . ; (vi) a corporation, partnership, limited liability company or any other entity, except a state-operated facility, which employs or engages a licensed health care provider and which primarily renders health care services; or (vii) a director, officer, employee, independent contractor, or agent of the persons or entities referenced herein, acting within the course and scope of his employment or engagement as related to health care or professional services. ⁸⁹

Medical professional liability insurance applies to both individual health care providers and institutional providers in Virginia. Like other types of professional liability coverage, medical malpractice policies vary in their breadth, exclusions from coverage, and interpretation of the language of the contract. Nonetheless, there are three distinct classes of medical liability coverage—individual, institutional, and outpatient clinics and infirmaries.

B. Individuals. Individual coverage is provided to physicians, physician assistants, nurses, nurse practitioners, pharmacists, dentists, licensed dental hygienists, osteopaths, psychologists, licensed counselors, licensed marriage and family therapists, social workers, chiropractors, podiatrists, opticians, optometrists, physical therapists, physical therapy assistants, medical technicians, and emergency medical care attendants. This class of insureds may also include medical laboratories, blood banks, and optical-related services.

C. Institutions. Institutional coverage is provided to health care entities such as hospitals, long-term care facilities, skilled nursing facilities, sub-acute care facilities, institutions for the mentally ill, and any other inpatient or residential facility that provides health care services.

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D. Outpatient Clinics and Infirmaries. The third class of insureds includes outpatient clinics, infirmaries, and dispensaries where there are no inpatient health services. These health care institutions may be related to industrial or commercial enterprises but should be distinguished from those facilities operated by dentists, physicians, and physical therapists, which generally are covered under individual policies.

14.303 What Is Covered.

A. In General. Malpractice insurance generally covers a health care provider against claims for damages, injury, or death arising from treatment that the insured or the insured's employee provided or should have provided to a patient. The insurance covers acts or omissions within the scope of the health care provider's practice and pursuant to the specifications of the individual policy. ⁹⁰

While most policies specifically define the acts or omissions covered, "medical malpractice" is defined by statute in Virginia. The Medical Malpractice Act ⁹¹ (the Act) defines medical malpractice as "any tort action or breach of contract action for personal injuries or wrongful death, based on health care or professional services rendered, or which should have been rendered, by a health care provider, to a patient." ⁹² The Act further defines "health care" as

any act, professional services in nursing homes, or treatment performed or furnished, or which should have been performed or furnished, by any health care provider for, to, or on behalf of a patient during the patient's medical diagnosis, care, treatment, or confinement. ⁹³

While the statutory definition is broad, it is important to be mindful of the actual coverage provided in the individual policy and by the terms and conditions of the insurer-insured relationship.

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B. Breach of Contract. The classic breach of contract action for medical malpractice relies on the allegation that the patient hired or entered into an "employment" agreement with the health care provider to obtain health care services. Alternatively, if a health care provider accepts a duty that is not imposed by the standard of care, a breach of that duty with resulting damages or harm may also give rise to a breach of contract action. The Act applies to torts allegedly committed during the provision of health care, as well as breach of contract actions based upon health care or professional services rendered, or which should have been rendered, by a health care provider to a patient. Many insurers will defend health care providers in suits involving allegations of medical negligence and breach of contract with a reservation of rights.

C. Sexual Misconduct. A suit for medical malpractice that includes an allegation of sexual misconduct is often covered by the malpractice carrier under a reservation of rights. However, suits alleging sexual misconduct often follow, or are followed by, a complaint to the appropriate regulatory board within the Department of Health Professions. These proceedings may or may not be covered by a practitioner's malpractice policy. ⁹⁴

D. Criminal Acts. As a general rule, criminal acts are not covered by the terms and conditions of a medical malpractice insurance policy.

E. Other Torts. Because the statutory definition of "malpractice" is quite broad, courts have applied the Act broadly as well. For example, battery, whether based on failure to obtain informed consent or an intentional bad act by the physician against the patient, constitutes medical malpractice if the claim arises from the provision of health care. ⁹⁵ In Glisson v. Loxley, ⁹⁶ the Virginia Supreme Court concluded, because malpractice is defined as "any tort based on health care" ⁹⁷ and battery is an intentional tort, that the claim is subject to the Act. Similarly, intentional infliction of emotional distress can constitute malpractice within the definition of the Act, ⁹⁸ as can a

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claim for breach of confidentiality. ⁹⁹ But the court has declined to find that the General Assembly has taken an "expansive" view of the terms "malpractice" and "health care." ¹⁰⁰

Plaintiffs are including, with increasing frequency, allegations of fraud in their suits for malpractice in an effort to circumvent application of the Act and its cap on recovery. However, if the alleged fraud arises out of health care, it is covered as malpractice in Virginia. Fraud is "purely a tort; it involves a misrepresentation, detrimentally relied upon, that occasions a loss." ¹⁰¹ Thus, health care providers are covered for allegations involving other torts outside of simple medical negligence...