Are you underinsured?
An introduction to the nuts and bolts of properly insuring your practice.
Finding the balance between too much and too little insurance coverage can be a challenge. How do you know where you stand? Asking your insurance company after you suffer a loss is not the way to find out.
As a veterinarian now specializing in veterinary insurance and risk management, I’ve seen many cases where practice owners thought they were covered, only to be left holding the bag when faced with unforeseen circumstances.
Before we dive further into the world of insurance and risk management, I would like to provide more background about myself.
Before entering the veterinary insurance industry in 2000, I spent 23 years in academic and private clinical practice, industry and consultation services. During this time I had the opportunity to work with many clients, veterinarians and industry leaders. I also began a friendship with the developer of an insurance program designed specifically for veterinarians and their unique needs. As he headed toward retirement, his organization decided to hire a veterinarian with both clinical experience and a national perspective of the veterinary industry to lead the program.
Over the years I have seen many sides of the veterinary medical profession. In upcoming issues of Today’s Veterinary Business, I will share real-life examples of others who have walked in your shoes — the ups, the downs and everything in between.
Do You Have Enough Coverage?
One of the best ways to evaluate whether your practice is adequately insured in this ever-evolving business and legal climate is to think about what’s most important to you. For example:
- Your reputation. Do your employees enjoy coming to work every day? What happens if one alleges discrimination or sexual misconduct? Do you have employment practices liability coverage, and how will it help keep your business intact and your reputation protected?
- Data, data, data. Hardly a day passes without the news of a cybersecurity event. Are you responsible for keeping your data secure? What if an employee or hacker steals your clients’ information or credit card numbers while transmitting electronic payments? Understanding cyber liability and network security coverage and proper protection protocols could help you prevent a cyber-related situation.
- Your facility and equipment. Are you in an area prone to earthquakes, hurricanes, snow storms or other inclement weather? What happens if your hospital is damaged? How about your equipment and supplies? Understanding how to insure your property, meet your contractual obligations and address exposure to local geographic perils is critical to making sure you are adequately protected.
- Your transportation. The use of company- or employee-owned vehicles for business purposes creates a major liability exposure. Having a detailed plan to manage this exposure is a critical component of any hospital’s risk-management strategy.
- Your staff and budget. Accidents happen. As a strategy to provide timely medical care and prevent legal squabbles, most states require businesses to carry workers’ compensation insurance. However, for many this line item represents one of their largest monthly overhead costs. What steps can you take to minimize this expense?
- Your license, and again, your reputation. The delivery of veterinary medical care is not an exact science. Mistakes will happen. While some clients will be more forgiving than others, it is important to understand how to protect yourself and your practice against those that are not so accepting.
Consider taking two simple steps to determine if you are underinsured. Let me provide examples.
A California veterinary hospital owner was referred to me after her practice suffered severe roof damage during heavy winter rains. She expected the landlord of her property to cover the damage. Unfortunately, the veterinarian was engaged in what’s called a triple net lease agreement, which required her to cover not only the rent and utilities but also the building insurance. To her dismay, she was unprotected for this loss and forced to cover the repairs.
Determine your exposures and liabilities. Some exposures are obvious and some are not. Since many of your exposures and liabilities are unique to the veterinary profession, I recommend you work with an insurance professional who has expertise in the veterinary industry to assist with identifying and addressing your business’s specific insurance needs. Likewise, have them review the insurance requirement section of your contracts to confirm that you have appropriate coverage for the legal liability you are agreeing to assume.
In another case, I received a call from a veterinarian who thought he was paying too much for his property and liability insurance. I asked him to do three things. First, complete a short application describing his property and business operation. Second, let me review his current policies. Last, schedule a few minutes for us to discuss his exposures and liabilities.
As I compared his application to his current business policy I noticed a number of discrepancies. One was that his 3,200-square-foot hospital was listed as a trailer on his current policy. He explained that he started as a solo large animal ambulatory practitioner and had used the trailer as an office. It was not until three years ago, after receiving a sizable inheritance, that he decided to expand his practice and build an actual hospital. When asked where the insurance was for the new building, he noted, “Guess I haven’t talked to my insurance company since I built it to let them know.”
One thing was certain: His insurance company may have raised his rates over the years, but it did not raise his limits to cover a freestanding building. If he had experienced a total loss to his building, the insurance company would have replaced it with a trailer!
Do not buy an insurance policy and forget about it.
It is a living document that requires ongoing attention. You should talk to your insurance agent before every policy renewal and conduct a global insurance and risk-management review of your business. Likewise, do this anytime you are considering a major purchase or change to your practice. Discuss not only what you have done but also any impending or anticipated changes and purchases. Your agent can assist you with providing the appropriate coverage at the appropriate time. The time will be well spent.
No Mumbo Jumbo
In my experience, I have found far more of my colleagues to be underinsured than overinsured. Only after you have identified your exposures and liabilities with the assistance of an insurance professional who understands the unique needs of the veterinary industry and your practice should you begin to consider cost as a part of your decision-making process.
Future articles will dive deeper into each topic noted above, among others. My goal is to avoid insurance mumbo jumbo and help you understand in simple terms the unique exposures you may face as well as how to mitigate potential risks.
If you have specific questions or topics you’d like me to address, please email [email protected].
Protect & Defend columnist Dr. Ed Branam is veterinary and animal services program manager for Safehold Special Risk Inc., a division of Wells Fargo Insurance. He serves on the American Veterinary Medical Association’s Legislative Advisory Committee.