1. Forms
2. PR
3. PR-03-00

What the Form Is

The PR 03 00 Deductible Liability Insurance endorsement is designed to be added to specific professional liability insurance coverage forms. Its primary function is to introduce a deductible that applies to each covered medical incident. This means the insured party is responsible for paying the initial portion of a covered loss, up to the deductible amount specified in the endorsement schedule. The insurance company's payment obligation begins only for the portion of the loss that exceeds this deductible. However, the endorsement also includes a provision allowing the insurer to pay all or part of the deductible to facilitate the settlement of a claim or lawsuit; in such cases, the insured is then required to reimburse the insurer for the deductible amount paid on their behalf.

Classes of Business It Applies To

This particular deductible endorsement, PR 03 00, is specifically intended for use with certain healthcare-related professional liability coverage forms. The primary classes of business include:

• Blood Banks: When used with the Blood Banks Professional Liability coverage form (e.g., PR 00 03).
• Hospitals: When used with the Hospital Professional Liability coverage form (e.g., PR 00 04).

For example, if a hospital insured under a policy with the PR 03 00 endorsement faces a malpractice claim resulting in a $150,000 settlement, and the deductible is $25,000 per medical incident, the hospital would be responsible for the first $25,000, and the insurer would cover the remaining $125,000.

Special Considerations

Several important considerations apply when using the PR 03 00 endorsement:

• Per Medical Incident Basis: The deductible applies to each medical incident, not per claim or per policy period, unless otherwise specified. This means multiple deductibles could apply if a series of unrelated medical incidents occur.
• Insurer's Right to Pay Deductible: The insurer retains the right to pay the deductible portion to settle a claim. This is often done to expedite settlement or to manage overall claim costs. However, the insured remains obligated to reimburse the insurer for this amount.
• Cost Control: The inclusion of a deductible is a cost-control measure for insurers, particularly in high-risk areas like medical professional liability, by having the insured retain a portion of the risk.
• Clarity for Insureds: It is crucial that the insured fully understands their responsibility for the deductible amount and the reimbursement provision.

Key Information for Agents and Underwriters

Agents and underwriters should be mindful of the following when dealing with the PR 03 00 endorsement:

• Pricing: The selection of a deductible level directly impacts the premium. A higher deductible generally results in a lower premium, as the insured is taking on more initial risk.
• Risk Assessment: Underwriters should assess the insured's financial capacity to meet the deductible obligations, especially if multiple incidents could occur.
• Coverage Explanation: Agents must clearly explain to the insured how the deductible works, particularly the 'per medical incident' application and the insurer's right to pay and seek reimbursement. This avoids misunderstandings at the time of a claim.
• Policy Structure: This endorsement modifies the underlying professional liability coverage form and should be read in conjunction with it to understand the full scope of coverage and obligations.
• Alternative Deductible Forms: It's important to note that other professional liability coverage forms may use different deductible endorsements (e.g., PR 03 01, PR 03 02) with potentially different terms or incident definitions (e.g., laboratory incident). Ensuring the correct deductible endorsement is used for the specific coverage form is essential.