Examining Provider/Client/VMS Contracts – Part 2

In “Examining Provider/Client/VMS Contracts – Part 1” we reviewed some of the basic elements of a contract with a locum tenens agency regarding control, employee language, and insurance requirements. While the primary purpose of these articles is to address contract terms generally, in future articles we will dissect common provisions of provider and client contracts between you, as the agency, and other involved parties. In this article, we will review some of the other major contractual provisions regarding indemnification schemes, primary and non-contributory provisions, waiver of subrogation requests, additional insured requests, choice of law/venue, and integration clauses. These provisions can severely impact your contractual liability and negatively influence your insurance coverage.

  • Indemnification Agreements – Indemnification agreements are a very common component of a contract. It is important to review them thoroughly as their usual intent is to pass liability from one party of the contract to the other party of a contract. In client contracts, for example, the intent is usually to pass liability from the client onto the agency. Some indemnification agreements are unilateral wherein only one party is obligated to indemnify the other party. Conversely, bilateral agreements require both parties to mutually indemnify each other. As a point of warning, bilateral agreements are not always equal. For instance, there are many times where the agency is required to indemnify the client for x, y and z. But, the client is only required to indemnify the agency for x and y. Also, indemnification agreements are one of the few ways agencies can be subjected to liability for actions or inactions of the provider despite an independent contractor relationship. Consequently, indemnification agreements should be reviewed with scrutiny. Some of the common elements to look for in indemnification agreements are:
    • What, and whose actions, does the indemnification agreement apply to? Does the contract require indemnification for solely the acts of the agency or does it require indemnification for some, or all, aspects of the provider as well? If agreeing to an indemnification agreement is necessary, it is preferable to agree to indemnify the contractual party for the actions of the agency and not the actions of the provider. When the agency is liable to indemnify the actions of the provider, the agency is taking responsibility for all the actions of the provider. This can apply to common claims like professional liability but it can also apply to property damage, sexual harassment, or any other action or inaction of the provider. Conversely, when the indemnification is limited to the acts of the agency only, that can severely reduce your indemnification liability since the agency’s duties are not nearly as risky as taking on responsibility for the agency and the provider.
    • Is the maximum amount of indemnification value specified in the contract? Ideally, if an agency chooses to agree to an indemnification agreement, it is preferable to limit the amount of exposure. Some of the common formulas to limit indemnification agreements are to “the amount of insurance carried, if any, by the agency” or “the amount of remuneration the agency has received from the contract.”
      For example, imagine a scenario where an agency operates under an agreement with an unlimited indemnification agreement. If a lawsuit deems the facility and agency should each contribute one million dollars in damages for actions of the provider or agency, then the agency may be obligated to pay for the million dollars they owe and indemnify the million dollars the client owes.
    • Does the contract contain a Business Associate Agreement or require indemnification for any cyber or regulatory liabilities? In today’s highly regulated healthcare environment, risk from cyber incidents or regulatory liability are much more common and often included in the contract or indemnification agreements. While we will discuss Business Associate Agreements thoroughly in a separate article, it is important to note that they typically have additional indemnification language that can apply to all types of exposure and may not be covered by a traditional insurance program.
    • Does your insurance program support exposure from indemnification agreements? – Insurance policies vary significantly in the way they cover locum tenens agreements with indemnification provisions. Whether your exposure is adequately passed onto the corresponding insurance carrier will depend heavily on the indemnification language, the policy language and allegations of the claim. For example, some indemnification agreements require the party to reimburse the opposing party for attorney fees and any liability the opposing party incurs. Other indemnification agreements require the indemnifying party to assume complete responsibility for the claim including the management of the defense and payment of any indemnity that may result. Before you agree to the terms of an indemnification agreements, it would be prudent to verify that exposure is covered by your insurance program.
  • Primary and Non-Contributory language – Many times contracts between an agency and client will require your insurance to be “primary and non contributory.” This “primary and non-contributory” verbiage means that, in the event you and your client both have applicable insurance, the agency’s policy will be the primary policy responsible and the agency’s insurer will not seek contribution from the client or the client’s insurance policies. Agencies should check for “other insurance” clauses in their own policies that state if there is other insurance available, the other insurance will be “primary” and the agency’s policy will be “secondary.” Therefore, if a client requires “primary and non-contributory” language, it would be best to verify that is acceptable to your insurance program carriers as agreeing to this provision can create a conflict with the verbiage of your policy(s).
  • Waiver of Subrogation language – In the context of locum tenens contracts, subrogation is the right of an insurer that paid a claim to seek reimbursement from another person, insurer, or entity. For example, imagine your insurer paid a claim for professional liability for one of the doctors you placed. If the insurer believes the facility was the culpable party, your insurer typically has the right of subrogation, or the right to seek financial repayment, from the facility or the facility’s insurance provider to reimburse your insurer for the claim it paid. If you agree to a waiver of subrogation, you are essentially waiving your insurance carriers rights and possibly violating the terms of your insurance policy and leaving yourself at risk. Accordingly, if you wish to agree to a waiver of subrogation in your locum tenens agreements, it is usually best to check with your insurance carrier to determine if your insurance carrier(s) are amenable to waving this right.
  • Additional Insured language – Often, additional insured verbiage requested of an agency imprecisely asks for what the client is actually seeking. For example, a client or facility may request to be an additional named insured when their intent is to become a certificate holder. The rights and duties vary greatly between many of these requests. Accordingly, below is a summary of common definitions, although definitions will vary between insurance
    • Named Insured – This is the policyholder. The named insured has all rights of the policy including the right to cancel, make changes, pay premiums, or file claims. Although it is frequently requested, it would be highly unusual to add a client or facility as a named insured on your policy(s). Typically, a client wants to be an additional insured.
    • Additional Named Insured – Additional named insured’s have all the rights of the named insured except those rights reserved to the named insured (such as canceling the policy or paying premiums). Additional named insureds are usually other entities controlled by the named insured. It is also common for a facility or client to request to be an additional named insured; however, they are generally seeking to be an additional insured or certificate holder.
    • Additional Insured – Additional insureds are usually a person or entity that the named insured desires to protect from the actions or inactions of the named insured or additional named insured. A well-drafted locum tenens contract typically requires a third party to be an additional insured. One of the most common methods of managing additional insureds is to have “blanket additional insured” on your policy(s).
    • Certificate Holder – A Certificate Holder is an entity or person provided with an insurance certificate as evidence of insurance. This may or may not confer a right for the certificate holder to receive notification of policy changes. Many times, when placing a provider, the facility will be listed as a certificate holder to provide evidence that the provider has coverage while working at that facility. As previously stated, many times facilities will request to be an additional named insured, additional insured, etc, when they are really seeking to be a certificate holder.
  • Choice of law/venue – Principals of legal procedure typically permit lawsuits to be filed in a multitude of territories and determine the governing law of a particular case. However, many locum tenens contracts will insert verbiage to control where a lawsuit must be filed and what law will adjudicate the dispute. Strategic preferences aside, trying a case in a foreign jurisdiction can create a severe burden on an agency. Accordingly, when signing a locum tenens contract, it is worth reviewing if your agency is comfortable with the legal risk and financial and logistical inconvenience the choice of law/venue clause requires.
  • Integration Clause – These are also commonly referred to as “Entire Agreement” or “Merger” clauses. The primary purpose of integration clauses is to assure a court not to look outside the “four corners” of the contract for additional evidence of the intent of the contracting parties. For example, if the contract states you will be paid in 30 days but an email suggests a different timeframe, the integration clause of the contract will allow the court to disregard the email correspondence. Accordingly, if a contract has an Integration Clause, it is a good idea to ensure it contains your entire understanding of the relationship.

In the thrill of putting deals together signing new clients, and creating new relationships, it is often easy to overlook some of the provisions in a contract that can haunt you later. I hope this series of articles helps you understand some of the terms of your locum tenens agreements. Future articles will address essentials for provider and client agreement, Workers Compensation, Auto Liability, Compensation Funds, and other areas that can impact your risk exposure and influence your liability

In the meantime, if you have any questions or we can be of any assistance, please feel free to reach out to me directly at 866-578-3161, email at tim@igaholdings.com or peruse www.locumsmalpractice.com or www.sheridanliability.com for more information.

Timothy E. Sheridan, J.D.
866-578-3161
tim@igaholdings.com
http://www.sheridanliability.com

Disclaimer – The information contained in this website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in your State. The content of this website contains general information and may not be up to date or correct. LocumsMalpractice.com and all of its affiliates, assigns, successors, etc. expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this website.

Examining Provider/Client/VMS Contracts – Part 1

As the Locum Tenen market continues to grow with new agencies, new clients, and new providers, it is important to understand the contracts that enable and control these relationships. These contracts create intended and unintended liability for both parties, open corporate liability, alter insurance exposure, create undue regulatory pressure, and be used as leverage against the Locum Tenen industry. As an insurance broker representing agencies, I have reviewed many managed service provider/vendor management system (MSP/VMS), client, and provider contracts. While the wording in these contacts varies significantly, and it would be impossible to point out all the differences in the various contracts, there are some consistent themes throughout Locum Tenen agreements. This article is the first of a two-piece introduction to a generalized overview of contracts used in the Locum Tenen industry. After the two-part introduction, future articles will dive further into provisions typically included in these contracts. For starters, important worker-status and insurance elements of contract review relevant in the Locum Tenen industry are:

  • Employee Status Provisions – The specific words in a contract are important to head and manage.  Some of the key words to watch for are:
    • Any type of “control” language – While the qualifications of an independent contractor varies by venue, determining who controls the work will nearly always determine if a provider is an independent contractor or an employee of the agency. If the agency controls the work of a provider, a regulatory body, such as the Department of Labor, the IRS, or an alternative party, may use that control to establish that the provider is partially or fully an employee of the agency where agency employment status was not intended. This is of paramount importance as courts continue to find joint employer status with increasing frequency. When reviewing your own contracts or those required by third parties, it is imperative to strike or modify any language that insinuates the agency has control over the provider.  Look for verbiage that requires an agency to “ensure,” “direct,” or “require” a provider to do or not do something. An agency may not practice medicine, control the practice of medicine, or control the medical providers it places. All variations of this type of control language can be used to demonstrate agency control over a provider and expose the agency to liability and unwanted regulatory consequences.
    • Any Language that References the Provider as an “Employee” – Many of the more sophisticated provider and client contracts drafted by a Locum Tenen agency or a VMS/MSP’s are careful to avoid referencing the provider as an employee. Other client or government facilities at times use form documents recycled from permanent placement contracts or nurse staffing contracts that use the term “employee” when referencing the Locum Tenen provider, rather than using some other defined term such as “provider” or “independent contractor.” This type of wording is extremely detrimental to the Locum Tenen agency.  Referring to providers as “employees” within a contract creates blurbs, or sound bites, that can be taken out of the context of a particular contract and used to create the existence of a relationship that was not intended. Facilities typically acquiesce to changing the word “employee” throughout a contract and this simple edit could preserve the integrity of your entity and relationship status
  • Insurance Provisions – Insurance provisions are included with most, if not all, contracts. The most common requirements are:
    • Professional Liability
      • Limits of liability – It is very common for the client and provider to require that you will maintain $1,000,000/$3,000,000 limits of liability. However, if you are placing providers in multiple states, it is paramount that you check the limits of liability your policy provides in each state. For example, if you are placing providers in Virginia, your limits are likely the statutory minimum of $2,200,000/$6,600,000. In Kansas, the limits your policy provides are likely $200,000/$600,000 due to the compensation fund. In the event of a malpractice claim, failing to maintain the contractual limits in every location may be regarded as a breach of contract that triggers several negative repercussions. It is noteworthy that this could be the case even if you provide more coverage than the contractually required amount. Accordingly, when a specific limit of liability is contractually required, it is prudent to add a provision similar to “unless higher or lower limits of liability are required by a state, regulatory body, or industry best practices” after the stated limits of liability.
      • Type of limit – Typically, depending on the state of placement, your existing policy will have a “per claim” limit rather than a “per provider” limit. If we continue with the same policy limit examples used above, a “per claim” limit simply means $1,000,000 of insurance is available for a particular claim, regardless of the number of providers you place or are named in a claim. As a comparison, if you have a “per provider” limit, you have $1,000,000 for every provider named in a claim. So, on a “per provider” limit, for every provider you place, you could have $1,000,000 available for each claim. Some contracts will specifically require a “per provider” limit or a “per claim” limit. Accordingly, it is important to check and ensure the limits of liability of your policy correlate with the limits of liability your contract requires.
      • Rating of carrier – Many Locum Tenen contracts require a minimum “A.M. Best” rating of a carrier. If you believe you will ever self-insure via a risk retention group or captive, be wary of this provision because your self insurance vehicle may not earn this rating unless further, costly, steps are taken. Further, it is worth ensuring that your carrier meets the rating requirements of the contract.
      • Extended Reporting “Tail” provisions – Most contracts require a policy in force continuously throughout the term of the contract or the purchase of an “extended reporting endorsement,” commonly referred to as a “tail.” A tail will continue coverage if you do not have a current “in force” policy.  The term of a tail required by a contract can be silent, limited to a specific time period (typically a statute of limitations), or for an unlimited time period. The tail policies offered by insurance carriers are offered by the number of years and many carriers cannot offer the unlimited term policies described in some Locum Tenen agreements. Therefore, it is important to verify that you can provide the tail duration required by the contract. As an aside, tail policies can be negotiated with most carriers and some carriers offer “stand alone” tail policies even if they were not the original carrier.
    • Workers’ Compensation – Many agreements require workers compensation coverage for “your employees.” If that is the case, there is nothing harmful with providing workers’ compensation for your employees, such as your recruiters and company management. Other contracts require workers’ compensation insurance for the providers. Providing workers’ compensation for providers can be used as evidence that providers are employees, rather than independent contractors. Accordingly, all provisions requiring workers’ compensation for providers should be removed.
    • General Liability – Many contacts will require you to carry General Liability insurance. These contract requirements differ in that some contracts require general liability for your company and some require general liability for the company and for the providers while on assignment. Policies covering the providers can only be purchased via a “stand alone” commercial general liability policy or by adding the general liability to a professional liability policy. It is important to identify the contractual requirements in order to maintain compliance.
    • Errors and Omissions (E&O) – Technically speaking, medical professional liability insurance, or medical malpractice insurance, is E&O insurance.  However, there are policies that are specifically designed for the errors and omissions of the agency itself (some of this exposure is usually contemplated in your medical malpractice insurance.) Unfortunately, many times contracts will require you to maintain E&O insurance and they are really referring to medical malpractice insurance.  If you are negotiating a contract requiring E&O coverage, the contract should specify if the requirement is for medical professional liability insurance or to E&O for your agency.
    • Directors and Officers Insurance – These policies can provide extremely broad protection for Directors and Officers of the company against suits directed at company management. Locum Tenen contracts rarely require Directors and Officers insurance; however, it may be prudent to ensure your company management is adequately covered contemporaneous to executing a new provider agreement.

The points above are merely a summary of the commonly onerous provisions regarding worker control and status verbiage and insurance provisions. In Part 2 of this series, we will continue to address important  common contractual requirements that can adversely impact your Locum Tenen organization and its liability.
In the meantime, if you have any questions, please feel free to reach out to me directly or review the additional information at http://www.locumsmalpractice.com.
Timothy E. Sheridan, J.D.
866-578-3161
tim@igaholdings.com
http://www.sheridanliability.com

Disclaimer – The information contained in this website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in your State. The content of this website contains general information and may not be up to date or correct. LocumsMalpractice.com and all of its affiliates, assigns, successors, etc. expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this website.

Florida Jury Awards 8.5M For Vicarious Liability

MDVIP, a large concierge medicine network, was recently penalized with a $8.5M award for the vicarious liability related to one of it’s independently contracted providers.  MDVIP’s marketing material language was the primary reason for the award because it represented to patients that it “identifies the Country’s finest physicians and, through a rigorous selection process, chooses only doctors with excellent credentials, with excellent reputations and skill with bedside manner that you will come to appreciate.”  MDVIP’s provider contract also enabled the Company to review the medical records of the providers and obligated the providers to ensure medical treatments meet the applicable standard of care which was used against MDVIP to show that they have “control” over the providers and create vicarious liability.

A determination of vicarious liability, such as the one charged against MDVIP, is found when a company or person is found liable for the actions of another.  This liability usually arises in Employer/Employee relationships and Principal/Agent relationships.  Vicarious liability is not intended to arise in an independent contractor relationship.  However, due to the marketing language, the wording in the contract, and some control measures MDVIP had in place, the jury found that MDVIP was vicariously responsible for the acts of the independently contracted providers.

When comparing the findings of this case to your business, it should be noted that some of the things MDVIP was doing were extreme and this was filed in a venue that is notorious for being Plaintiff friendly.  Additionally, MDVIP was marketing these services directly to the patients whereas Locum agencies market to facilities and providers.  Still, some of the marketing and contract language used against MDVIP appears frequently in the marketing material, client contracts and provider contracts of many locum agencies.

The line between and independent contractor and employee varies by territory and is, at best, grey.  But, some of the things you can do to mitigate the possibility of vicarious liability are:

  • Review your contracts thoroughly. Anything that involves “control” or a locum agency directing how medicine is practiced can be used to create vicarious liability.
  • Review your marketing material thoroughly.  Verbiage mentioning the quality of your contracting process, the contracted providers, or your “verifications of credentials process” can create vicarious liability and can be deemed a representation relied upon to someone’s detriment.

For more information on vicarious liability and a no obligation assessment of your exposure, please feel free to reach out to us at 866-578-3161 or info@igaholdings.com.  You can also visit LocumsMalpractice.com

Insurance and Risk Management tips for the Locum Tenen industry