1. Forms
2. PR
3. PR-03-02

What the form is

The PR 03 02 Deductible Liability Insurance form is an endorsement used to introduce a deductible to certain professional liability insurance policies. It specifically modifies the underlying coverage forms PR 00 01, PR 00 02, PR 00 05, and PR 00 06. The core function of this endorsement is to stipulate that the insured is responsible for an agreed-upon amount of a covered loss before the insurance coverage begins to pay. A key feature of the PR 03 02 is its provision for applying separate deductible amounts for different types of incidents covered under the policy, namely per medical incident and per business entity incident.

Classes of business it applies to

This endorsement is designed for use with professional liability coverage forms tailored for healthcare providers. It is relevant for various medical professionals, clinics, hospitals, and other healthcare organizations that are insured under the specified base forms (PR 00 01, PR 00 02, PR 00 05, PR 00 06). For example, a multi-physician clinic might utilize this endorsement to apply a specific deductible to medical malpractice claims (medical incidents) and a potentially different deductible for claims made against the clinic as a business entity (e.g., certain administrative errors or omissions if covered by a business entity incident provision).

Special considerations

• Separate Deductibles: The primary characteristic of this endorsement is its ability to establish distinct deductibles for each Insuring Agreement: one for medical incidents and another for business entity incidents. This allows for more tailored risk management and premium calculation.
• Insurer's Duty to Defend: The inclusion of this deductible endorsement does not alter the insurance company's right and duty to defend the insured against covered claims. The insured also remains obligated to comply with all policy duties.
• Claim Settlement and Deductible Reimbursement: In some situations, an insurer might choose to pay the full amount of a claim, including the deductible, to facilitate a quick settlement. If this occurs, the insurer will then typically notify the insured and seek reimbursement for the deductible amount it paid on the insured's behalf.

Key information for agents and underwriters

• Risk Management and Premium Impact: The PR 03 02 endorsement serves as a mechanism for insureds to share in the risk, which can lead to lower premiums. The choice of deductible level(s) allows insureds to balance their risk tolerance with premium costs.
• Underwriting Assessment: Underwriters must carefully evaluate an insured's financial stability and capacity to absorb the selected deductible amounts, particularly since there can be separate deductibles for different types of incidents.
• Agent's Role: Agents should clearly explain to clients how the deductibles function, especially the distinction between the per-medical-incident and per-business-entity-incident deductibles. It's also important to clarify the process for claims handling when a deductible applies, including potential reimbursement scenarios.
• Market Stability: For insurers, the ability to incorporate deductibles via endorsements like PR 03 02 is important for maintaining the viability of offering coverage in high-exposure lines such as medical professional liability, which can involve substantial claim amounts.