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.

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.


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