Physicians should review closely hold harmless clauses in managed care contracts

Managed Care Organization (MCO) contracts can be daunting, as they are often long and contain small print and extensive legal terminology. Physicians should review closely such contracts and, when possible, negotiate changes to the contract language to better protect their interests. While the entire managed care contract warrants careful review, the “hold harmless” clause is a contract area that warrants close review, and deletion from the MCO contracts whenever possible. Otherwise known as indemnification clauses, hold harmless clauses are included in many MCO contracts, and they expose physicians to greater liability. It is especially important for physicians to understand this, because many professional liability insurance providers specifically exempt such clauses from professional liability coverage, which may result in the physician being exposed to the MCO’s liability.

The hold harmless clause included in MCO contracts typically requires a physician to indemnify, hold harmless and defend a MCO from and against any and all loss, damage, liability and expense, including reasonable attorney fees attributable to acts and omissions of the physician. This means that if an action or investigation is initiated, or any other claim is made against the physician that involves the MCO, the physician will be responsible for any costs the MCO incurs, even if the physician is ultimately exonerated. Some clauses go as far as requiring the physician to hold the MCO harmless, even if the injury is due to delayed or denied care by the MCO.

Such clauses can pose other problems for physicians as well. They can interfere with the defense of a physician’s malpractice case by preventing the physician’s attorney from bringing the MCO into the claim, even in circumstances where MCO negligence may be a factor. In some cases, professional liability insurers have denied coverage in such a suit because the contract the physician signed with the MCO eliminated the insurer’s ability to seek contribution from the MCO.

A physician’s ability to negotiate the removal of the hold harmless clause may be dependent on a number of factors, such as the size of their group and the availability of other physicians in those specialties. Some MCOs have agreed to eliminate “old harmless clauses when presented with evidence that they are specifically exempted from the physician’s professional liability insurance, and as a result create a gap in coverage for the physician. Other MCOs have been unwilling to eliminate or modify such clauses.

If it is not possible to negotiate the removal of the clause, a physician should consult with their professional liability insurer to determine if their policy includes coverage for hold harmless clauses. This is often referred to as “contractual liability coverage.” If the policy does not include such coverage and the physician is committed to contracting with the MCO, they should seriously consider adding the appropriate endorsement to their policy to limit their personal liability.

Physicians with questions about their insurance coverage should contact their professional liability insurer.