Caption Corner Part 16 – Two Important U’s of Insurance and Unconditional Liability for Identity Theft

As licensed practitioners, there is no doubt that you should have a professional liability insurance policy to cover you for malpractice, a cyber or data breach insurance policy to insure you for HIPAA violations arising from third party information breach, and a general liability insurance policy covering your office, fire perils, bodily injury, and third party property.This month we will continue to discuss some of the most important liability insurance terms that you need to know: Underwriting Risk – Conditional Binding and Unconditional aspects.

Underwriting Risk – Conditional Binding

Underwriting is a broad range of tasks and functions that insurance agents and insurance underwriters conduct while evaluating risk selection during insurance policy application and insurance policy renewal. In the banking and commercial finance industry, credit underwriters assess the risk of repayment or investment return before investing in loans and lease finance.

All underwriting risk and credit decisions have a certain degree of uncertainty and when a loss will occur. Statistics are used to model insurance loss outcomes for a decade or longer and determine loss frequencies and loss amounts, premiums, and independent variables that are manifested in underwriting questions and related elements on insurance policy applications.

In professional liability insurance policy underwriting, for example, risks are classified using characteristics that are likely to produce the same or similar claims loss experience for each risk over time.

A bifurcated example on a normal statistical distribution classic Bell-curve is the frequency and severity of patient death claim losses at the low frequency-high severity end of the Bell-curve; versus State Licensing Board inquiries at the high frequency-low severity end of the Bell-curve. All social work insurance risks have a specified risk profile such as the type of practice, the composition of occupations in the practice, and type of insured such as a student, educator, practitioner, or part-time versus full-time scope. These profiles are considered in underwriting and risk assessment.

Insurance underwriting includes a common contractual treatment called conditional binding. Under a conditional receipt, the applicant and the insurance carrier form a conditional contract that is contingent on the conditions that existed when an application or other requirements under the application are completed. It provides for immediate insurance coverage for the applicant, provided that the applicant fulfills all of the requisite underwriting requirements; (the conditions).

The insurance agent has the duty to disclose to the applicant that the applicant is covered on the condition that the applicant proves to be insurable and comply with the required conditions.

Unconditional aspects

Regarding insurance some benefits under the policy are unconditional. Check your policy to see. Regarding benefits payments, in some states, the insurance company is only required to make “unconditional” payment to an insured, not to a third-party claimant.

Typically the only duty imposed on the insurance company regarding third-party claims is to make a written offer to settle if deemed appropriate by the insurance company and the policy contract.

Regarding social work practice, there are a number of unconditional legal elements that relate to identity theft that the law holds the practitioner responsible for. The government takes identity theft seriously.

The Identity Theft and Assumption Deterrence Act of 1998 made identity theft a federal crime with penalties of up to 15 years in prison and $250,000 in fines. Included are stolen drivers licenses and the victim’s identity being used.

Here are some other elements that you should know:

1. The Privacy Rights Clearinghouse reports that although internet information breaches are growing at 40% annually, the greater and more frequent threat of information breach is from the traditional low-tech sources of information breaches such as stolen mail, garbage, trash, and misplaced paper files. Misplaced files occur either by practitioners, associates, or third-parties transporting and storing paper records. (CPMI Professional Development, Inc., Harrington Education Center, 2010) Check you cyber liability policy to see if you are covered.
2. The 45 CFR part 160 HIPAA HITECH law passed by Congress in 2013 holds the social worker accountable for criminal and civil; penalties if they allow a third-party like a mover of their paper files, or a digital warehouse provider to lose or breach their information. Resolving even the smallest breach claim will cost the social worker at least $12,000 because there are legal defense fees, notification fees required for each individual patient, compliance audits of systems and procedures by professional IT personnel, and providing ID Theft subscription services for a year. The Preferra Insurance Company RRG’s CLCS Cyber Liability policy covers these perils with no deductible.
3. Pursuant to FACTA, (Fair and Accurate Credit Transactions Act of 2003), an employer can be fined $2,500 for each violation when employee information is disclosed without permission. This also includes would-be-employees who have not been hired, but who have submitted any information to you as a prospective employer that originated from any credit report or recruiting service. FACTA also requires that upon termination of an employee from your practice, that the employee’s personal information (includes the name and all other information), must be destroyed by shredding, burning, and all computer disks that contain the terminated employee’s information wiped clean. Throwing away the information and papers in the trash does not suffice.
4. Many social workers work in hospice practices with clergy. When visiting a hospital or in-patient facility, it is illegal to inquire who in any religious denomination is a patient. Privacy issues require that existing members notify their leader that another member is in the facility in order for clergy to visit. (CPMI Professional Development, Inc., Harrington Education Center, 2010)

Published March 2018