1. Forms
2. PR
3. PR-03-04

What the form is

The PR 03 04 Deductible Liability Insurance form is an endorsement used by the Insurance Services Office (ISO) to introduce a deductible to specific professional liability insurance policies, namely forms PR 00 13 and PR 00 14. Its primary function is to state the amount of deductible that applies to each covered "Veterinary Incident" and to clarify that the insurance company will pay only those amounts that exceed this deductible. This form is identical to form PR 03 02 except for its specific reference to "Veterinary Incident" rather than a general "Medical Incident," tailoring it for use in veterinary professional liability.

Classes of business it applies to

This endorsement is specifically designed for professionals and businesses in the veterinary field that are insured under ISO's professional liability coverage forms PR 00 13 (Veterinarians Professional Liability Coverage Form - Claims-Made Basis) or PR 00 14 (Veterinarians Professional Liability Coverage Form - Occurrence Basis).

Real-world example: A veterinary clinic holding a PR 00 13 professional liability policy might add the PR 03 04 endorsement to introduce a $5,000 deductible per veterinary incident. If a malpractice claim arises from a surgical error (a "Veterinary Incident") and results in a $15,000 covered loss, the clinic would be responsible for the first $5,000, and the insurer would cover the remaining $10,000, subject to policy limits and other terms.

Special considerations

• Impact on Coverage: The introduction of a deductible means the insured party agrees to bear a portion of the loss for each claim. This can lead to lower premiums but increases the insured's out-of-pocket expenses in the event of a claim.
• Definition of "Veterinary Incident": The application of the deductible is tied to the definition of "Veterinary Incident" as outlined in the underlying coverage form (PR 00 13 or PR 00 14). It's crucial for the insured to understand this definition.
• Insurer's Duty to Defend: Even with a deductible, the insurance company typically retains the right and duty to defend the insured against claims. If the insurer pays a claim that includes the deductible amount (for instance, to settle a claim quickly), the named insured is then obligated to reimburse the insurer for the deductible amount.

Key information for agents and underwriters

• Pricing: The selection of a deductible level directly impacts the premium. Higher deductibles generally result in lower premiums because the insurer's exposure is reduced. Underwriters will assess the insured's financial stability and risk profile when determining acceptable deductible levels.
• Risk Assessment: For underwriters, the presence of this endorsement means evaluating the insured's capacity to absorb the deductible amount in case of multiple claims. The nature of the veterinary practice (e.g., small animal, large animal, specialized surgery) and its claims history will influence the suitability of certain deductible amounts.
• Agent's Role: Agents should clearly explain to clients how the deductible will function, the financial implications of different deductible levels, and how it interacts with the overall coverage provided by forms PR 00 13 or PR 00 14. Ensuring the client understands their financial responsibility per incident is paramount.
• Coverage Gaps: While this form introduces a deductible, it doesn't alter other provisions of the coverage form unless specifically stated. Agents should ensure clients understand that the deductible applies per incident, and multiple incidents could mean multiple deductible payments within a policy period.