OGC Opinion No. 08-06-02

The Office of General Counsel issued the following opinion on June 4, 2008 representing the position of the New York State Insurance Department.

Re: New York Medical Professional Liability Insurance

Questions Presented:

1. May a physician practice medicine in New York State without having professional liability insurance?

2. May a New York physician obtain insurance for professional liability through a group policy issued to an out-of-state professional association by an insurer licensed to transact an insurance business in the jurisdiction where the association is headquartered?

3. May a company domiciled outside of New York but which owns a New York health care facility obtain liability insurance under a group policy issued outside of New York?

Conclusions:

1. Except for specified limited circumstances where a physician has been disciplined, there is no statutory requirement at present that a physician practicing in New York carry professional liability insurance.

2. & 3. No. As a general matter, physician groups may not purchase group liability insurance in New York, even if the master policy is issued and delivered outside of the state, and irrespective of whether the insurer is authorized to do an insurance business in New York. However, group coverage may be purchased through a purchasing group.

Facts:

As background to the first question about the need to carry professional liability insurance, the inquirer, an insurance trade association, cited to a December 17, 2007 article in Newsday concerning medical malpractice. That article stated:

The inquirer asks whether a physician may practice medicine in New York without carrying professional liability insurance.

In addition, the inquirer provided two hypothetical situations where (1) a New York physician obtains professional liability insurance through a out-of-state professional association, and (2) an out-of-state company obtains professional liability insurance for a New York health facility under an insurance policy issued outside of New York. In each scenario, it asks whether a New York physician may, either directly or through a corporate parent, obtain coverage through a group liability policy.

Analysis:

The first inquiry is whether a physician in New York must carry professional liability insurance. There is nothing in the Insurance Law or the regulations promulgated thereunder that mandates such coverage. Nor does Education Law § 6524, which establishes the minimum requirements for licensure as a physician require that the physician carry professional liability insurance in New York. However, for those physicians who have been disciplined and placed on probation, Public Health Law § 230 provides, in pertinent part:

Public Health Law § 230 thus provides that when an appropriate authority disciplines a physician with a restriction on practice other than suspension, the physician must carry a specific amount of professional liability insurance.

Notwithstanding the statutory scheme, general hospitals in New York typically require, as a condition of granting privileges to any physician (even those physicians who have not been formally disciplined), that the physician maintain professional liability insurance from an insurer in an amount satisfactory to the hospital. Thus, as a practical matter, the vast majority of physicians licensed to practice medicine in New York likely maintain professional liability insurance.

The other questions relate to group property/casualty insurance. The inquirer presents two hypothetical situations, but does not provide specific details. The questions also relate to whether and to what extent an unauthorized insurer may do business in New York. Accordingly, this response is general in nature.

In New York, group property/casualty insurance is generally governed by N.Y. Ins. Law § 3435 (McKinney 2007), which provides:

In 2000, the Superintendent of Insurance promulgated N.Y. Comp. Codes R & Regs. tit. 11, Part 153 (Regulation 135) to effectuate Insurance Law § 3435.

Both Insurance Law § 3435 and Regulation 135 permit the issuance of group property/casualty insurance only with respect to public and not-for-profit insureds. Thus, under New York law, group property/casualty insurance for physician groups may not be written in New York, even if the policy is issued out of state. However, there is a significant exception because, pursuant to the federal Liability Risk Retention Act, see 15 U.S.C. § 5901 et seq. (West 2003) and Article 59 of the Insurance Law, group insurance in New York may be purchased through a purchasing group that has registered in New York. A New York risk also may be covered by a policy issued by a risk retention group out-of-state.

11 NYCRR §§ 153.1(q) and 153.7 permit the issuance of individual property/casualty insurance policies merchandised on a mass marketing basis under certain circumstances, such as for members of an association. However, it is unclear from the submission whether the out-of-state professional “association” referenced in the first hypothetical would be within the purview of the regulation.

Lastly, unlike life and accident & health insurance (see Insurance Law § 1101(b)(2)(B)), there is no provision in the Insurance Law that authorizes the sale, delivery, or continuation of certificates in New York for group property/casualty insurance policies validly issued outside of New York. Thus, other than policies issued to purchasing groups or coverage issued out of state by risk retention groups, New York does not permit physician groups to obtain coverage under group property/casualty policies.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.