Does my insurance policy cover the indemnification ...



Frequently Asked Questions

Health Care Staffing Contracts and Insurance Certification

1. Does my insurance policy cover the indemnification agreement my client is asking me to sign?

Indemnification agreements often include the phrases “any and all liabilities”; “any claim, cost, expense, liability, penalty, or fine”; “any negligent acts, errors, or omissions”; or similar broad language. Insurance policies are subject to limitations and exclusions and never provide coverage for any and all losses that may arise from your business operations. Thus, it is impossible to extend your insurance to cover any and all losses that may be suffered by your indemnitee.

Your policy may contain limited coverage for indemnification assumed in a client contract. You should contact your agent or insurance company to determine the existence and extent of such protection before signing the contract.

Often, staffing firm sales representatives or account managers will sign broad client contracts without understanding the ramifications or getting preapproval by the staffing firm’s insurance carrier. This, then, can result in the staffing firm being sued by the client for breach of contract when the firm cannot, or does not, indemnify the client due to the limitations of its insurance coverage.

With the varying client demands and forms of staffing agreements, it's hard for staffing firms to know how to protect themselves. Many staffing firms feel pressured to sign client agreements because the client claims "every other staffing firm signs it."

Staffing firms are not insurers. They should not be expected to cover risks beyond those inherent in the staffing business. What are those risks? In general, they involve (1) the risks related to being an employer, such as payment of wages and benefits, payroll taxes, etc., in those cases in which the staffing firms employ their assigned health care workers (physicians generally are independent contractors and not employees), and (2) liability for client loss or damage caused by the staffing firm's failure to properly screen or otherwise qualify the assigned worker for the job. But staffing firms should not assume risks related to the client's business, including liability for the client's products and services.

That said, most health care staffing claims are made against the assigned workers for alleged negligence in performance of or failure to perform professional services, regardless of the quality or effectiveness of the firm’s screening. The health care staffing firm is often named in the claim but it’s less common that liability will be assessed against the firm itself. The majority of the firms’ claim payments are made on behalf of their assigned worker.

To help ASA members and their attorneys deal with these and other issues, ASA has developed suggested contract language that spells out the staffing firm's and the client's responsibilities. Price terms or other provisions of a competitive nature are not included.

These agreements are not intended as legal advice. They provide suggested language only, and modification may be necessary or desirable in particular cases. Before using these forms or any of their provisions, staffing firms are strongly urged to seek the advice of competent legal counsel.

2. Why are professional liability limits required or requested by clients typically so large?

Many hospitals self-insure a significant portion of their liability exposure. Hospitals will attempt to protect their self-insurance funds by transferring their exposure to another party (i.e., the staffing firm). Historically, limits of $1,000,000 per claim/$3,000,000 aggregate for professional (malpractice) and general liability for individual practitioners were acceptable to hospitals. The size of malpractice awards and settlements has increased over time, and multimillion dollar claims are not uncommon. Requested limits may now range from $2,000,000 per claim/$4,000,000 aggregate to $5,000,000 per claim/$8,000,000 aggregate.

To the extent requested limits are deemed to be too large by the staffing firm, they should be addressed early in the negotiations with the client.

3. Why am I being asked to name my client as an additional insured on my general and professional liability policies?

Your client may want to protect the limits and loss record of its own policy from claims brought against it as a result of your alleged negligence. The company may also want to be assured of any defense agreed to under the indemnification agreement.

As with contractual liability insurance, you should contact your agent or insurer before agreeing to include your client as an additional insured. You should carefully read the wording of any proposed additional insured endorsement to your policy, as the scope may not be as broad as the obligation accepted in the contract.

4. My insurer has agreed to add my client as an additional insured to my liability policies. The client has also asked for a “separation of insureds” provision. What does this mean and can I get this from my insurer?

Your client wants to retain its right to sue you and have your policy respond on your behalf. If your policy does not contain separation of insureds language, this right may not exist. Your agent or insurer can tell you if your policy contains this provision.

5. Why am I being asked to add the vendor managers as an additional insured?

The vendor manager is working on behalf of the hospital to manage the procurement process. The VMS is looking to avoid liability for screening or directing your assigned worker.

6. What is a waiver of subrogation, and why am I asked to provide it?

Subrogation is when a third party legally acquires your right to sue another party that may be responsible for all or part of a loss. Many insurance policies grant subrogation rights to the insurer. Your client wants to avoid your insurer exercising its right to subrogate against the client.

You should contact your agent or insurer before agreeing to a subrogation waiver. Some policies contain a provision that allows you to waive the policy’s subrogation rights prior to, but not following, a loss. If such language is not in your policy, it may be possible to obtain an amendment from the insurer.

The standard workers’ compensation policy does not clearly state whether preloss waivers are allowed. You should contact your agent or insurer and ask that your policy be endorsed. Your insurer may charge an additional premium to include a waiver of subrogation endorsement. In some states, workers’ compensation waivers are prohibited. You should make certain a waiver is allowed in your state before signing the client contract.

7. Can we agree to “primary and noncontributory” as respects our general and professional liability insurance?

Requests for additional insured status sometimes specify that it be provided on a primary and noncontributory basis. Your client is seeking assurance that your coverage will respond first and its own insurance will be excess if your coverage is not sufficient.

Before you agree to this request in a client contract, you should contact your agent or insurer to determine if your policies need to be amended.

8. My client has requested an alternate employer endorsement be added to my workers’ compensation policy. What is the purpose of this endorsement?

Your client is concerned it may be found responsible for providing workers’ compensation benefits to your employee. The alternate employer endorsement protects your client under your policy if such a situation arises. You must have agreed to provide this endorsement in a written contract prior to the occurrence of the injury.

The endorsement also states your insurer will not seek contribution from your client’s insurer for such loss paid on the client’s behalf.

9. Why does my client want me to purchase nonowned auto coverage?

If your employee, while driving his or her own vehicle, is alleged to be at fault in an accident, the employee’s auto insurance policy should respond. In a catastrophic accident, damages could easily exceed the limits of the employee’s personal insurance. If that happens, the injured party might look elsewhere for compensation.

Nonowned auto insurance is designed to protect your firm if you are named in a claim because your employee was alleged to be driving “on your business.” It won’t respond until other valid and collectible insurance is exhausted (e.g., your employee’s personal auto policy). An employee running an errand for you in his personal vehicle presents a nonowned auto exposure to your firm, as well as employees who regularly use their own vehicles for business purposes.

While the above are easily understood examples of nonowned auto situations, the definition of “driving on your business” sometimes is not so clear and ends up being determined by the courts.

Your client is concerned that your employee, while driving to and from the assignment, might be determined to have been driving on your business, on the client’s business, or both. The client wants the assurance that you have nonowned auto coverage so it can avoid being brought into the claim or being asked to contribute more because you have no available coverage.

10. Why won’t my agent add the requested cancellation language to the certificate of insurance provided to my client?

The purpose of the certificate of insurance is to present a “snapshot” of the policyholder’s insurance limits, coverage period, and other general information regarding the policy. It does not confer rights to the certificate holder and does not amend or alter the policy. It is not a legally binding document.

The Association for Cooperative Operations Research and Development publishes numerous forms used by the insurance industry. ACORD forms, including the ACORD certificate, are used by agents under copyright license and cannot be altered beyond the permission granted in the ACORD Forms Instruction Guide.

The ACORD certificate says that if the policies described therein are cancelled before their expiration date, the issuing insurer will “endeavor to” mail ____ days’ advance notice to the certificate holder. The certificate issuer is allowed to fill in the blank but is not to alter the remainder of the section.

Insurance companies have not provided, or endeavored to provide, advance notice to certificate holders for decades. The cancellation clause in the policy itself says the insurer will provide advance notice to the First Named Insured (your staffing firm). It’s rare that an insurer will amend the cancellation provision to extend advance notice to another party, including an additional insured.

Staffing firm clients frequently attempt to dictate, via the contract, how the insurance certificate will be written, including deletion of the words “endeavor to” in the cancellation section. Agents cannot comply with the terms of the contract because the requested certificate wording is in conflict with the policy as written.

In addition to potential misrepresentation of the policy and copyright issues associated with alteration of the certificate, agents risk noncompliance with state statutes that dictate how cancellation notice may be written in both the insurance policy and the certificate. Alteration of the certificate could be in violation of one or more of such statutes.

Unless your insurer has amended the policy to state it will provide advance notice to the certificate holder (your client), the insurer has no obligation to notify your client, regardless of what is stated in the client contract or the certificate of insurance.

11. A client contract requires that I use an insurance company rated “A” by A.M. Best. What does that mean?

Many rating companies assign financial ratings to insurance companies to help you determine an insurer's financial stability. A.M. Best is a widely used rating company. A.M. Best assigns 15 different ratings from A++ to F, measuring an insurer's financial strength and ability to meet its ongoing insurance policy and contract obligations.

A.M. Best uses the following descriptors:

A++, A+ (Secure/Superior)

A, A- (Secure/Excellent)

B++, B+ (Secure/Good)

B, B- (Vulnerable/Fair)

C++, C+ (Vulnerable/Marginal)

C, C- (Vulnerable/Weak)

D (Vulnerable/Poor)

E (Vulnerable/Under Regulatory Supervision)

F (Vulnerable/In Liquidation)

S (Rating Suspended)

To enhance the usefulness of ratings, A.M. Best assigns each rated insurance company a Financial Size Category (FSC). According to A.M. Best, the FSC is based on adjusted policyholders' surplus (PHS) and is designed to provide a convenient indicator of the size of a company in terms of its statutory surplus and related accounts. Financial size categories range from Class I (less than $1,000,000) to Class XV ($2,000,000,000 or more).

Other rating services include Moody's Investors Service, Standard & Poor’s, Weiss Research Inc., and Fitch Ratings Ltd. Your agent is not a guarantor of the solvency of any insurance company and has no way of confirming the accuracy of any of the findings or classifications assigned by A.M. Best or any of the other rating services.

12. What is the difference between occurrence and claims made?

Occurrence policy: A policy that covers claims that arise out of damage or injury that took place during the policy period, regardless of when claims are made. No prior acts coverage is needed. Prior acts coverage is a feature of claims-made policies that have either no retroactive date or a retroactive date earlier than the inception date of the policy. Such a policy covers claims during the policy period arising out of events that precede the policy period. Without such a feature, the policy's retroactive date would preclude coverage with respect to these "prior acts." In addition, no tail coverage is needed because incidents that occurred during the policy period are covered no matter how much later they are reported. Tail coverage responds to cover incidents that have not been reported to the company during the policy term.

Claims-made: A policy that covers claims first made (reported or filed) during the year the policy is in force for any incidents that occurred that year or during any previous period during which the insured was covered under a claims-made contract. This form of coverage is in contrast with the occurrence policy, which covers an incident that occurred while the policy is in force regardless of when the claim arising out of that incident is filed.

A claims-made policy may be endorsed to respond to incidents that occurred before the policy start date. This is also referred to as policy retroactive date. Tail coverage responds to cover incidents that have not been reported to the company during the policy term. Some companies will offer a free tail upon full retirement of an individually named provider. You should contact your agent or insurer to determine if your policies need to be amended for tail coverage or to determine the cost for tail coverage.

Does my medical professional liability policy cover my errors and omissions exposure for nonmedical placements such as cafeteria workers placed in a hospital? Will I need to purchase a separate staffing errors and omissions policy?

The typical insuring agreement in a medical professional liability policy states

We will pay those amounts that the insured becomes legally required to pay as damages because of “medical professional injury” that results from acts or omissions in the providing of or failure to provide “health care professional services” by or for an insured. The coverage applies to “medical professional injury” that relates to a “medical incident.” For those workers who are placed in a medical environment but may cause a “financial loss” to a health care facility without causing a “medical incident,” you may need to purchase an additional staffing errors and omissions policy. Such examples include but are not limited to: administrative assistant, customer service attendant, food service, housekeeping, material handler, etc. Please discuss with your agent or broker to help identify if this exposure exists and if you are covered properly.

This document was developed by members of the ASA health care section policy council, including representatives from CHG Healthcare Services, Maxim Healthcare Services Inc., and Medfinders. In addition, associate members Lockton Cos. Inc. and Risk Transfer Inc. contributed. This document is not intended, and should not be relied upon, as legal advice. Staffing firms are advised to speak with their insurance brokers or agents for guidance on insurance-related questions. In addition, staffing firms are urged to seek the advice of competent legal counsel when necessary.

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