Pharmacy Insurance Market Update

The pharmacy malpractice market continues to face turbulence with reports that prominent carriers are pulling back on coverage for specialty operations. This follows Hartford’s recent retreat from writing pharmacy liability coverage.

Our brokers are working at a feverish pace to find new homes for our clients, old and new. We encourage compounding pharmacies other specialty operations to contact us early, ideally four months before their renewal. We are having great success placing insurance at costs below expiring.

The biggest issue clients are facing is whether to move to claims made policy form or stay on occurrence. Occurrence policies cover claims based on the year of injury, no matter when a lawsuit is brought or the error is discovered. These policies are cleaner but more expensive and increasingly harder to find.

Many faculties facing a difficult insurance market have decided to move to claims made coverage. On a move to claims made the company sets a “retroactive date”, which will not change in the years to come. Any claims made during the policy period from events after that date will be covered. Because of this step up in exposure the pricing starts out low and moves up over a period of three to five years.

Moving to a claims made policy generally lowers costs in the short term and opens up a number of new markets. Our belief is that competition lowers pricing and there are almost ten times as many markets writing claims made coverage than occurrence. The more markets we can approach on a clients behalf the better terms we can secure. Despite several high profile claims scaring several companies away from specialty pharmacies we still have underwriters who view the space as a good risk.

Underwriters prefer claims made policies because they are easier to price. When an error is made that leads to a pharmacy malpractice claim the eventual settlement could take a decade to play out. Actuaries and underwriting managers prefer the ability to tweak rates quickly as needed, writing coverage on a claims made basis allows them to move their underwriting guidelines quicker than if they had written occurrence policies.

The main concern with claims made policies is the “tail” or “extended reporting period”. If a facility had purchased occurrence coverage they could stop buying at any time and be covered for any claims after ceasing operations. With a claims made policy there is always a pool of uncovered liabilities that must be covered if the pharmacy closes or is sold.

Contact today to discuss better ways to protect your organization is a tough liability environment. We are dedicated to our clients and work hard to drive the best deals possible.