Apr 19, 2016

Legislation introduced to ease medical malpractice placement in excess-lines market

Legislation was introduced this week to repeal the requirement that excess-lines brokers must obtain a declination from the medical malpractice insurance pool before the broker can place primary malpractice insurance in the excess-lines market. The bill (S.7339) was referred to the Senate Insurance Committee and does not currently have an Assembly sponsor.

There are only four insurers that write a significant volume of medical malpractice business, insuring over 80 percent of the New York market. Three of those insurers support the fourth insurer financially by bearing a portion of the losses which exceed premium. That fourth market is the residual market, Medical Malpractice Insurance Pool. MMIP exists to underwrite all medical malpractice risks rejected by licensed insurers. MMIP insures physicians and hospitals which cannot obtain insurance from other licensed insurers in New York willing to write medical malpractice risks.

State law currently requires excess-lines brokers to obtain a declination from the MMIP before the broker can place primary malpractice insurance in the excess-lines market. As a practical matter, MMIP will not decline such risks except in the rarest of circumstances, which, bars the excess-lines market from this line of business in New York.

This bill would repeal the requirement for the excess-lines brokers to obtain a declination from the MMIP. According to the sponsors, repealing the MMIP declination requirement will provide doctors, dentists and general hospitals a broader array of choices, products, terms and conditions to suit a professional's particular insurance needs. While all insurers, including MMIP, will be permitted to continue to make available their malpractice insurance products, the addition of excess-lines insurers will allow insureds greater choice in the selection of insurance policies which best suit their needs from a number of additional, highly rated insurers.