UNCHARTED TERRITORY – Lawsuits Filed Against You

First, we want to recognize that the behavioral health and social work professions are genuinely noble and founded on service, integrity, and clinical expertise. Although the professions can be stressful and dangerous, the nation is grateful for what you do—AND SO ARE WE! Thank You!

In a past TIP article, the question was asked, “What is that you do not want, but once you have it, you never want to lose it?”

A lawsuit!

Here is the key takeaway of this article.

“Social Inflation” continues to be a key topic in 2024. It is here to stay.

Well, what is social inflation? It is not a common term outside of the insurance industry. Still, it is a dagger thrust into the heart of insurance carriers, and indirectly into you, that has continued to increase insurance policy premiums, increase deductibles, increase exclusions, and decrease sub-limits. All of these factors combine to make your life more miserable!

Rough Notes insurance publication (February 2024, p.-59) writes that social inflation, as defined by the Insurance Information Institute, is a societal trends that cause higher pre-trial settlements, increased litigation, and “exorbitant” jury awards. Several factors drive this behavior, such as investor-funded lawsuits, nuclear verdicts by sympathetic juries, and “Runaway litigation” with inflated claims. What impacts you as the insured, underinsured, or uninsured practitioner is the “Runaway litigation” followed by the nuclear verdict – a ticket for bankruptcy.

Preferra recommends increasing your professional liability coverage to at least $2 million per occurrence and your general liability insurance to $2 million per occurrence. This will double your coverage at a fraction of the premium increase. The annual premium cost is typically less than one-quarter of what you pay now for half the per-occurrence limit.

Moreover, if you do not have a Preferra policy, you are probably not covered for severe insurance claims such as sexual misconduct by your employees, contractors, and you. You are also not covered for your clients’ divorce litigation or underinsured for fire liability. This uninsured exposure will bankrupt you.

The U.S. Chamber of Commerce Institute for Legal Reform found that nuclear verdicts increased in frequency and severity between 2010 and 2019, with the median verdict up 27%. By 2019, verdicts over $20 million were up over 300% (Rough Notes, February 2024, p.-59). Every insurance line of business has been impacted, including professional liability. Professional liability lawsuit cases settled a decade ago below $100,000 are now reaching $1,000,000. The drivers of the lawsuit allegations include negligence, misrepresentation, and unintentional conduct.

This paradigm shift will continue to cause a “hard market.” In insurance terms, a “hard market” occurs when carriers exit the market or refuse to cover certain occupations, and those who remain reduce the coverage and increase the premium. For example, carriers refuse to cover legal defense and indemnity arising from sexual misconduct, even as a negligence claim. Not Preferra; Preferra even covers your employees and contractors for this claim up to the per occurrence limit. Carriers refuse to cover legal defense and indemnity arising from divorce litigation. Not Preferra. Carriers impose a low $250,000 fire limit on their general liability policies. Not Preferra. Carriers impose a deductible. Not Preferra.

In closing, you need to do the following immediately:

• If you do not have a Preferra insurance policy, read your policy contract to see where you are exposed. Then buy a Preferra policy.
• Buy a Preferra $2 million per occurrence professional liability policy and a Preferra $2 million per occurrence general liability policy.
• Enroll in Preferra’s continuing educational programs and read the Preferra monthly tip articles to learn what is happening in your profession from a risk perspective.