One of three vital steps to protect your medical practice from the very common exposure of an employment related lawsuit is to have Employment Practices Liability Insurance or EPLI. As an employer, you are responsible for not only your own interactions and compliance with employment law, but for everything employees do with the public and each other. I recommend having at least $1 million in coverage in this area, as legal defense costs alone can be six figures, as are many awards. EPLI covers wrongful acts of employees as well as claims of wrongful termination, sexual harassment or discrimination. But it doesn’t stop there. The list includes, but is not limited to: defamation of character, privacy breaches, being passed over for a promotion or even the lack of an employee evaluation. Evaluation can actually be defined on broader terms by being deprived of a career opportunity. One of the largest exposures could be the breach of the employment contract. It could include human resources where the management of employee benefits was poorly overseen. Most EPLI policies will cover legal costs whether the employer wins the suit or not. But it generally doesn’t cover civil or criminal fine assessments or punitive damages.   Read more…

Key Points to Remember: Umbrella policies are not magic shields against anything that might happen, no matter how much it costs. They are an essential first line of defense and the most cost effective and basic first step in your asset-protection plan. In many cases a one million dollar umbrella can cost just a few hundred dollars a year. They have limits that are very clearly defined by the insurance company. If the personal liability umbrella, the one that’s typically related to your home and auto coverage, is what you are considering, it probably won’t cover issues not reasonably related to either of those base policies in most cases. So, for example, a dog bite that occurs at your home may be covered, but a lawsuit by an employee almost certainly will not. My advice to clients is buy every dollar of insurance you can reasonably afford for as many reasonably predictable risks as possible. Assume there will be a gap in the coverage at some point so be certain that you’re personal assets are organized and protected. Implement an asset-protection plan that legally separates your personal and professional assets and liabilities today, while you still have right to do so. I get dozens of   Read more…

Once a captive insurance company is formed and licensed, the captive owner must now turn its attention to actually running the captive. Although stated several times before, it bears repeating here: a captive is an insurance company and it must be operated as such. As daunting as that may sound initially, you either have heard or will hear from captive industry consultants that managing a captive is not terribly challenging provided you have the right support team in place. While I believe that is essentially true, I also believe you should clearly understand all the requirements before you turn over the management responsibility to anyone. I believe it is a big mistake to outsource something simply because you do not understand it. You should first understand each component’s role in the captive operation well enough to ask the right questions; then secure a resource expert in managing that function. So the first step in the process is to learn the responsibilities of each captive-management function. In order to delegate the responsibilities you must know what they are. Second, no matter what partners are retained to provide management support, you are still ultimately responsible for the regulatory compliance of the captive.   Read more…

When a company contemplates the formation of a captive insurance company as a part of its risk-financing strategy, it typically conducts a feasibility study. The feasibility study is actually quite often a requirement by domiciles but that should not be the sole reason it is conducted. The critical purpose of a feasibility study is to evaluate the efficacy of the captive investment. That is, the study answers the question, “What can I expect as a return on my investment in this captive insurance company?” While an investment in a captive is not the same as an investment in a new piece of business-related equipment or an investment in a new start-up division of the company, it nonetheless will have a financial impact that must be clearly evaluated and understood prior to formation. Because of the distinct differences between analyzing a captive insurance company investment and a more typical investment related to the business operations, it’s crucially important to involve risk-management advisors who are experienced in performing captive-feasibility studies. We will address the specific components of a feasibility study in chapter 8. When the feasibility study reveals that a captive insurance company will provide appropriate investment returns for the captive investor(s)   Read more…