The Importance of Coverage for PCs and other Legal Entities

When it comes to malpractice insurance, many orthodontists focus solely on individual coverage. However, ensuring that your professional corporation, such as a PC, LLC, S Corp, or other legal entity, is also insured is just as important and is required by AAOIC. Whether you operate as a solo practitioner or manage a larger practice, protecting your corporation is essential to safeguarding your assets and career.

Why Insure Your Corporation?

Orthodontists may be familiar with the need for individual malpractice insurance, but many don’t realize their corporation can also be a target in lawsuits. Plaintiffs usually sue both the individual orthodontist and their corporate entity. If the corporation isn’t insured, it will not be defended under your individual policy, leaving it liable for indemnity payments and defense costs.

Consider these examples:

• A corporate owner insured individually by AAOIC may not have treated the suing patient, but if another orthodontist working for the corporation provided treatment, the corporation could still be sued.
• In a solo practice where the owner provides all treatment, the corporation itself has separate assets and is treated as a separate legal entity. This makes it a potential target in legal proceedings.

These scenarios highlight why adding coverage for your corporation is crucial, regardless of your practice size or structure.

Named Insured vs. Additional Insured

Understanding the difference between “named insured” and “additional insured” coverage is key to ensuring proper protection:

Named Insured: This typically applies to professional corporations where the orthodontist has ownership. It ensures the corporation is defended in lawsuits, providing essential protection for the corporate owners.

Additional Insured: This typically applies to some professional corporations, partnerships and other legal entities and protects the owner(s) of the corporation from liability. When non-owner orthodontists are employed, this coverage is typically required by employers to protect the entity from indirect liability. It ensures the corporation is provided coverage from claims arising from an orthodontist employee’s professional actions.

For orthodontists entering employment agreements, reviewing contracts for “additional insured” requirements is vital. Many times, an employer may attempt to require a “hold harmless agreement” in a contract with an employee orthodontist, which states that the employed orthodontist is legally responsible for the action of other employees. However, adequate protection for the employer can be achieved by having the employee orthodontist name the employer’s corporation as an “additional insured.”

How to Add Coverage

AAOIC makes it simple to include your corporation or employer in your policy. On the application, there are specific sections to request both “professional corporation (named insured)” and “additional insured” coverage. While there’s a small additional premium for these coverages, the cost is minimal compared to the financial risks of leaving your corporation uninsured.

Guidance for New Graduates and Established Professionals

Whether you’re just starting your career or managing a thriving practice, it’s important to take the following steps:

• Review Your Needs: If you own a professional corporation, add it as a named insured. If you’re employed, check your agreement for additional insured requirements.
• Understand the Risks: Realize that lawsuits can target corporations even if the individual orthodontist had no direct involvement in the treatment.
• Consult AAOIC: Our team is here to guide you through the process and ensure you have the right coverage in place.

AAOIC is committed to protecting orthodontists and their practices. Stay informed and proactive about your insurance coverage to ensure continuous protection as you navigate different stages of your orthodontic career. AAOIC believes that protecting your career is worth doing right. Learn more about how AAOIC can help!