Medical Mutual Insurance Company of Maine

Accessibility - A characteristic of some insurance policies in which policyholders are obliged to pay money, in addition to premiums, if the insurer experiences losses.

Actuary - A mathematician who uses statistical analysis to compute insurance risks and premiums.

Admitted Asset - An asset permitted on the statutory balance sheet by state insurance regulatory authorities as opposed to non-admitted assets.

Affidavit - A voluntary, written statement of facts made under oath before an officer of the court or before a notary public.

Affirmative Defense - A response to allegations in a complaint that constitutes a defense, even assuming the alleged facts to be true. Common examples of affirmative defenses include the statute of limitations and the contributory negligence of the opposing party.

Agent - The independent agent usually represents two or more insurance companies in a sales and service capacity and is paid on a commission basis. The exclusive agent represents only one company, usually on a commission basis. The direct writer is the salaried or commissioned employee of a single company.

Aggregate Limit - See Limits of Liability

Allegation - A statement of a party to an action, made in a legal pleading, setting out what the party expects to prove.

Annual Statement - A financial statement that an insurer must file each year with the insurance commissioner in a state in which the insurer is licensed or does business.

Answer - A document filed with the court that contains the defendant's response to allegations set forth in the plaintiff's complaint.

Appeal - A process by which a decision of a trial court is brought for review to a court of higher jurisdiction, typically known as an appellate court.

Appellate Court - A court that reviews trial court decisions to determine whether errors of law were committed by the trial judge.

Application - A written statement by a prospective insured that provides information about the applicant to be used in determining his or her insurability.

Arbitration - An alternative to a court trial for resolution of a dispute (e.g., a claim) between two or more parties. In arbitration, a case is heard and resolved by an arbitrator or a panel of arbitrators. Arbitration may be entered into by agreement or may be mandated by statute, and the arbitration decision may be binding or nonbinding.

Assets - As applicable to insurance, all funds, property, goods, securities, right of action or resources of any kind owned by an insurance company, less such items as are declared non-admitted for statutory accounting purposes by state laws.

Attorney-in-Fact - An entity that manages interinsurance exchange. Each policyholder gives authority to the attorney-in-fact to exchange insurance with the other policyholders.

Binder - A temporary coverage agreement that is used until an insurance policy is formally in effect.

Broker - A marketing specialist who represents buyers of property and liability insurance and who deals with either agents or companies in arranging for the coverage required by the customer.

Burden of Proof - The responsibility in a legal proceeding for presenting sufficient evidence to prove a fact or facts in dispute. The plaintiff typically has the burden of proof.

Capitation - A per capita uniform restitution or fee.

Captive Insurance Company - A wholly owned subsidiary of an association or group, organized for the purpose of insuring the risks of the association or group.

Carrier - See Insurance Company

Case - A legal action or cause of action; a matter in dispute; a suit or lawsuit.

Case Law - The legal principles derived from judicial decisions, also known as common law. Case law differs from statutory law, which is enacted by legislatures.

Cause of Action - A set of alleged facts that forms the basis for a plaintiff’s complaint.

Certificate of Authority -A document issued by a state insurance department that gives an insurer the authority to write insurance in that state.

Claim - In common parlance, any demand for compensation. What constitutes a claim that must be reported to an insurance company varies but is always defined in the policy.

Claimant - The person or party sending the notice of claim.

Claims-Made Insurance Policy - An insurance policy that provides coverage for claims arising from incidents that both occur and are reported to the insurance company while the policy is in force. A claims-made policy is in force from the starting date of the initial policy period (the retroactive date) and continues in force from that date through each subsequent renewal. When a claims-made policy is terminated, future claims arising from incidents that occurred during the policy period are not covered.

Claims-Paid Insurance Policy - An insurance policy that provides coverage for claims arising from incidents that occur while the policy is in force and that are both reported and paid while the policy is in force. Claims-paid policies are a variant of claims-made policies.

Claims Representative - An insurance company professional who investigates and develops claims from first report to final resolution. Your claims representative interacts closely with you and with your defense counsel.

Combined Ratio - The sum of the ratio of losses and loss adjustment expenses incurred to premiums earned plus the ratio of commissions and other underwriting expenses incurred to premiums written (if using statutory accounting, otherwise use premiums earned).

Commercial Carriers - For-profit insurance companies, also known as traditional or traditional-line insurers. Commercial carriers are regulated by state laws and must qualify financially to do business in a state.

Complaint - A legal document that is the initial pleading filed by a plaintiff in a civil lawsuit. A complaint, sometimes known as a declaration, gives a defendant notice of the alleged facts constituting the cause of action. The complaint, accompanied by the summons, is served on the defendant by a process server or, in some states, by certified mail.

Conditions - Qualifications attached to the promises made by an insurer.

Contingency Fee - A fee agreement between a plaintiff and an attorney whereby the plaintiff agrees to pay the attorney a percentage of the damages recovered. If no damages are recovered, no fee is owed to the attorney.

Contract - An agreement between competent, consenting parties that creates, modifies, or terminates rights and responsibilities. To be legally enforceable, a contract must be supported by "consideration," which may be thought of as a promise for or transfer of something of value, usually money or services.

Counterclaim - A defendant's claim against a plaintiff or another defendant, usually asserted with the answer to the complaint.

Court Costs - The costs of litigating a lawsuit, not including attorney's fees. After trial, the prevailing party may file a motion for costs, which is reviewed by a judge, in order to determine what, if any, costs are allowable.

Covenant - A legal document that is used to settle claims. A covenant constitutes a promise not to sue or not to execute on a judgment (See Release).

Credentialing - The process of reviewing a health care practitioner's credentials, i.e., training, experience, or demonstrated ability, for the purpose of determining if criteria for clinical privileging are met for inclusion into the network of providers.

Damages - The sum of money a court or jury awards as compensation for a tort or breach of contract. The law recognizes several categories of damages.

Damages (Special or Economic)- Out-of-pocket damages that can be quantified, such as medical expenses, lost wages, rehabilitation costs, or household services.

Damages (Punitive/exemplary) - Damages awarded to the plaintiff in cases of intentional tort or gross negligence to punish the defendant or act as a deterrent to others.

Date of Incident - The date on which an alleged incident of malpractice occurred.

Date of Reporting - The date on which an incident is reported to an insurer.

Declaration - A component of an insurance policy, also known as a "face sheet." The declaration personalizes the policy by specifying certain information.

Deductible - A form of cost-sharing by policyholders. Coverage of a benefit after the policyholder has met a predetermined share of costs.

Defendant - The person or party being sued.

Defense Attorney - An attorney who defends a person being sued (defendant).

Deposition - A discovery procedure whereby each party may question the parties and other witnesses in a lawsuit. Depositions are conducted prior to trial, under oath, and are admissible at trial under certain circumstances.

Direct Writer - An insurer that sells policies through salaried employees instead of through independent agents or brokers.

Discovery - The disclosure of pertinent facts or documents by parties involved in a lawsuit.

Dismissal - An act of termination by a court; for example, the dismissal of a lawsuit or portion thereof, or of a party.

Dividend - A partial return of insureds' premiums, when, for example, the insurer's financial position is especially good.

Earned Premium - The portion of a premium which is recognized as income based on the expired portion of the policy period. The portion which is not recognized is called unearned premium.

Endorsement - An addition to an insurance policy that changes the original policy provisions in some manner, also called a rider, policy change, or amendment.

Excess Liability Coverage - Insurance coverage that provides limits of liability over and above the limits of an underlying primary policy.

Exclusions - The component of an insurance policy that sets forth the circumstances under which the physician will not be covered.

Experience Rating - The practice of basing insurance premiums on past loss history.

Extended Reporting Endorsement - See Tail Coverage

Frequency of Claims - Refers to the number of claims that are filed in a given period. The frequency and average severity of claims are the fundamental variables used in determining insurance premiums.

General Liability Insurance - A type of liability insurance, other than automobile, workers' compensation, and employer's liability, that covers damage or bodily injury. In a health care setting, general liability insurance covers such incidents as a visitor slipping on a wet floor of a hospital or the theft of a patient's belongings.

Good Samaritan Statute - A statute enacted to encourage individuals to stop and assist injured persons by granting immunity from liability for any negligence resulting from an attempt to give emergency aid without the expectation of payment.

Grievance - A verbal or written complaint concerning a person, service, quality of care, or contractual coverage.

Group Insurance - Any insurance plan under which a number of persons and their dependents are insured under a single policy, issued to their employer or to an association with which they are affiliated.

Guaranty Fund - Established by law in every state, these funds are typically maintained by a state's commissioner of insurance to protect policyholders in the event that an insurer becomes insolvent or otherwise unable to meet its financial obligations. The funds are usually financed by assessments against all property and casualty insurers regulated by a state.

Hold Harmless Clause - A clause in some contracts and leases that attempts to shift liability from one party to another (for example, from a health maintenance organization to an employed physician). Courts may modify or refuse to uphold such agreements if they are deemed harmful to the public or if the parties are perceived to have unequal bargaining power.

Incident - An event or situation that causes unanticipated harm to a patient.

Indemnity - Money damages awarded to an injured party.

Installment Premiums - Premiums payable periodically during the policy term rather than all at once near the policy inception.

Insurance - A contractual relationship that exists when one party (an insurance company or carrier), in consideration of a fixed sum (a premium), agrees to reimburse another (an insured, or policyholder) for any losses, up to the limits of the policy, caused by designated contingencies.

Insurance Company - A company, also known as an insurer, a carrier, or a provider, that is licensed by a state to sell some or all types of insurance.

Insured - The party or parties covered by an insurance policy. Also called a policyholder.

Insurer - See Insurance Company

Interinsurance Exchange - An association of insurance policyholders, also known as a reciprocal exchange, in which the policyholders join together and "exchange" their rights and obligations, thereby insuring one another.

Interrogatories - A discovery procedure in which one party submits a series of written questions to the opposing party, who must answer in writing under oath within a certain period of time. The answers are admissible at trial under certain circumstances.

Investment Income - The portion of a company's income which is derived from its investments, including interest and dividends on stocks and bonds.

Joint Underwriting Association (JUA) - A government-administered, risk-pooling arrangement established by law in a number of states to provide professional liability insurance to health care providers. A JUA is structured to be financed by assessments against its participants, but typically also has the authority to assess property and casualty insurers licensed to do business in a state in the event of a deficit.

JUA - See Joint Underwriting Association

Judgment - The final entry in the legal record of a case, which is binding upon the parties unless it is overturned or modified upon appeal. A judgment typically consists of a finding in favor of one or more of the parties and an assessment of damages and costs, if any. In a jury trial, the judgment may follow or, under certain circumstances, modify the jury's verdict.

Jury Trial - A trial in which 6 to 12 registered voters are impaneled to hear the evidence, determine the facts, and render a verdict.

Liability - Obligation that a person has incurred or might incur through any breach of a legally enforced duty; responsibility for conduct falling below a certain standard that is the causal connection of the plaintiff's injury.

Limits of Coverage - See Limits of Liability

Limits of Liability - The maximum amount an insurer will pay out under the terms of a policy. Professional liability policies typically specify both a per occurrence limit and an aggregate limit for all claims incurred during the term of a contract, e.g., $1 million (per occurrence)/$3 million (aggregate).

Litigation - The process of resolving a dispute in a court of law to determine factual and legal issues and the rights and duties between the parties to the controversy. This process may result in an award of damages, either through settlement or as a result of a jury (or judicial) verdict in favor of the plaintiff.

Locum Tenens - The term for a physician who takes over the practice of another physician on a temporary basis.

Loss - The occurrence of an event which will cause the insurer to make a claim payment.

Loss Adjustment Expenses - The costs of a loss other than the actual claim payment. Such costs include expenses for the investigation, settlement, and administration of claims. This would include salaried and external claim adjusters and claim attorneys.

Malpractice - A civil case in which there is an allegation that a physician deviated from applicable standards of care in the care and treatment of a patient and that the deviation proximately caused injury to the patient.

Motion - A written or oral court plea requesting that a judge make an order or ruling affecting the lawsuit.

Mutual Insurance Company - A company organized as "cooperative" activity by a group of persons, whereby all participants share the losses and profits of the business. A mutual company has no formal stockholders or capital stock.

NAIC - National Association of Insurance Commissioners. An association of the state regulatory authorities.

Negligence - Negligence in a medical negligence case is the failure to use such care as a reasonably prudent and careful physician would use under similar circumstances.

Net Underwriting Profit or Loss - Statutory underwriting profit less (or loss plus) dividends to policyholders.

No-fault Compensation - A method for compensating persons injured during the course of medical treatment, regardless of whether the injury was caused by the negligence or fault of a health care provider.

Non-Admitted Asset - An asset not permitted on the statutory balance sheet by state insurance regulatory authorities.

Non-Economic Damages: typically intangible damages, such as pain and suffering, disfigurement, interference with ordinary enjoyment of life, or loss of consortium (marital services).

Nose Coverage - See Prior Acts Coverage

Notice of Claim - A document sent by mail or served by a sheriff, which outlines the allegations against the physician or health care provider.

Occurrence - See Incident

Occurrence Policy - A type of professional liability insurance policy in which the policyholder is covered for any incident that occurs during the term of the policy, regardless of when a claim arising from the incident is made. Occurrence policies have been largely supplanted by claims-made policies in the medical professional liability insurance market.

Patient Compensation Fund - A fund established by law in a few states that pays benefits to patients injured in the course of medical treatment. Benefits may be awarded on either a fault basis or a no-fault basis, depending on the state. The fund's benefits may either supplement the payment made by a defendant in a medical professional liability claim or be the primary compensation, again depending on the state.

Periodic Payments - Damages paid over a period of time instead of in a lump sum. Periodic payments may be mandated when damages exceed a certain amount. Some periodic payment awards cease upon the death of the plaintiff.

Plaintiff - The party who initiates a lawsuit by filing the complaint; the claimant.

Pleadings - Certain documents filed in a lawsuit, consisting of the complaint, the answer, and any affirmative defenses or counterclaims, which identify and clarify the issues in dispute.

Policy - The contractual agreement between an insurance company and its insureds. The policy sets forth the rights and obligations of both parties to the agreement.

Policyholder - See Insured

Policyholders' Surplus - Total assets minus total liabilities on the statutory balance sheet.

Preferred Risk - A risk that an insurer finds favorable.

Prelitigation Screening Panel - In the state of Maine (and in New Hampshire for claims filed after 9/1/2006), all medical negligence claims are first heard by a Panel, comprised of a chairperson, an attorney, and a physician. Following the Panel Hearing, the case can progress through the usual court system with the plaintiff filing a complaint.

Premium - The amount of money an insured pays for an insurance policy. The premium is calculated by the insurance company's underwriters to bring in enough money to establish reserves for future losses; pay current losses; cover the company's operating expenses, including the cost of defending claims; and, if the company is organized as a profit-making business, generate a profit. (See Underwriting)

Premium Credit - A reduction in premium that acknowledges an expected reduction in risk due to claims history, completion of a risk management course, or a variety of other factors. (See Experience Rating)

Premium Tax - A tax imposed by a state on premiums written by insurers doing business in that state.

Primary Coverage - The first layer of insurance coverage.

Prior Acts - Incidents that have occurred, but have not yet been filed as claims, prior to the onset of the company-insured relationship. Companies typically require a new insured to purchase supplemental coverage (either tail or prior acts coverage) to protect against claims arising from prior acts.

Prior Acts Coverage - A supplement to a claims-made insurance policy that may be purchased from a new carrier when a physician changes carriers and had claims-made coverage with the previous carrier. A prior acts policy, also known as nose coverage, covers incidents that occurred prior to the beginning of the new insurance relationship but for which no claim has yet been made. Prior acts coverage is an alternative to an extended reporting endorsement, also known as tail coverage, which is purchased from the original carrier when a change in carriers is made.

Proximate Cause - An act or omission that, uninterrupted by any intervening cause, produces an injury. Proximate causation is one of the four elements that a plaintiff must prove in a negligence claim. In a medical professional liability case, a plaintiff must prove that failure to adhere to the standard of care was the proximate cause of the injury to the patient. (See Standard of Care)

Rate - The basis or classification upon which the premium is based; often used as a synonym for premium.

Reciprocal Insurance Company - A company organized as a "cooperative" activity in which an attorney-in-fact operates on behalf of the policyholders, who agree to share each other's losses. Like a mutual company, a reciprocal company has no stockholders or capital stock.

Reinsurance - A contract in which one insurance company buys insurance from a second insurance company (the reinsurer) to cover part of the risk the first company has insured. The amount of risk a company reinsures varies from carrier to carrier.

Release - A statement signed by one party relinquishing a legal claim against another party, usually in exchange for a money payment. (See Settlement)

Reporting Requirement - The contractual obligation of an insured to report promptly to the carrier any claim for damages asserted against the insured. What constitutes a claim that must be reported varies from company to company but is always defined in the policy.

Reservation of Rights - An insurance term that refers to the situation arising when there is a question as to whether a given incident is covered. Typically, an insurer is obligated to defend a claim during the time the coverage issue between insurer and policyholder is being resolved.

Reserve - Money set aside and invested by an insurance company to pay estimated future losses. A company's claims department typically specifies a reserve amount for every claim that is filed, which may be modified as the claim proceeds in the courts.

Respondeat Superior - A legal doctrine that holds an employer liable for the actions of employees acting within the scope of their employment.

Retroactive Date - The retroactive date on a claims made policy means that coverage under the policy applies only to claims arising out of Professional Services rendered on or after the stated retroactive date provided the claim is reported while the policy is in effect and has not been reported to another insurance company prior to the effective date of the policy.

Retroactive Rating - See Experience Rating, Premium Credit

Retrospective Premium - Premium determined based on the actual loss experience under the policy.

Rider - See Endorsement

Risk - Potential financial liability, particularly with respect to who or what is legally responsible for the liability. With insurance, risk is limited by the policy dollar limitations. Providers may also bear risk if they are paid a fixed amount, such as capitation.

Risk Based Capital (RBC) - An amount computed for an insurer based on a standard NAIC formula against which the insurer's policyholders' surplus is measured to assess its adequacy. Various regulatory actions are triggered based on the degree to which an insurer's policyholders' surplus falls below its RBC.

Risk Classification - A classification based on the number and size of losses that can be predicted from a physician's specialty and procedures. A physician's risk classification is used in determining his or her premium.

Risk Purchasing Group (RPG) - A group of similarly situated persons or entities that are permitted under federal law to organize across state lines to buy insurance. The carrier that sells insurance to the group must be licensed in at least one state but need not be licensed in every state where a member of the group resides.

Risk Retention Group (RRG) - A group of similarly situated persons or entities that are permitted under federal law to organize across state lines for the purpose of pooling their liability risk and self-insuring. If the group is licensed in one state, it is permitted to solicit business and sell insurance nationwide without fulfilling each state's licensure requirements.

RPG - See Risk Purchasing Group

RRG - See Risk Retention Group

Schedule - The component of an insurance policy that lists the limits of liability.

Self-insurance - A direct assumption of the risk of liability.

Settlement - An agreement between opposing parties in which the claimant accepts "consideration," usually a money payment, in exchange for a release of any legal right against the party upon whose behalf the payment is made.

Severity of Claims - Also known as claim magnitude, severity is the dollar value of a claim as determined by jury verdict or settlement agreement. The frequency and average severity of claims are the principal variables used in determining insurance premiums.

Standard of Care - A term used in the legal definition of medical professional negligence. A physician is required to adhere to the standards of practice of reasonably competent physicians, in the same or similar circumstances, with comparable training and experience.

Standard Risk - An insured who is entitled to coverage without additional charges or restrictions according to the insurer's underwriting standards.

Statute of Limitations - The time period established by law during which a plaintiff may file a lawsuit. Once this period expires, the plaintiff's lawsuit can be barred.

Statutory Law - Laws enacted by a legislature, as opposed to case law.

Stipulation - An agreement made by both parties to a case, proceeding, or trial that regulates some matter related to the litigation. For instance, litigants can stipulate to extend the time period for pleadings to be filed or to admit certain facts into evidence at trial.

Stock Insurance Company - An insurance company that is a for-profit corporation, with stockholders who have invested capital in the company and are entitled to its profits.

Structured Settlement - A settlement agreement between the parties to a lawsuit or a claim in which the damages are paid to the plaintiff over a period of time (periodic payments) instead of in a lump sum. These settlements are usually financed through the purchase of an annuity.

Subpoena - A court order requiring a witness to appear at a certain date, time and place to give testimony or produce documents.

Suit - See Case

Summary Judgment - A judgment in favor of either party that is made prior to trial. Summary judgment is only granted when there is no material fact in dispute and one of the parties is entitled to judgment as a matter of law.

Summons - A legal document that must accompany a complaint. A summons gives notice that a malpractice action has been filed. It is served on the defendant by a sheriff.

Surplus - The amount by which an insurer's assets exceed its liabilities.

Surplus-Line Insurers - Insurers that are regulated for solvency but not for policy provisions or premium rates.

Syndicate Insurance Company - A company organized by groups of entities that each agree to share in selling insurance to the syndicate's policyholders and pledge their personal assets to cover the losses of the policyholders.

Tail Coverage - A supplement to a claims-made policy that provides coverage for any incident that occurred while the claims-made insurance was in effect but had not been brought as a claim by the time the insurer-policyholder relationship terminated. Tail coverage, also known as an extended reporting endorsement, is generally necessary whenever an insured covered by a claims-made policy changes carriers, retires, becomes disabled, or dies.

Testimony - Oral evidence taken under oath in a legal matter, used to prove or refute an allegation.

Tort - A civil wrong for which an action can be filed in court to recover damages for personal injury or property damage resulting from negligent acts or intentional misconduct.

Tort Reform - A term used to describe collectively a number of legislative and judicial modifications to traditional tort law.

Traditional Line Carriers - See Commercial Carriers

Trial Court - The court of first jurisdiction, where pleadings are filed, witnesses appear, testimony is taken, and judgments are entered; also referred to as the “lower court”.

Umbrella Coverage - A policy that provides broader coverage than a primary policy.

Underwriting - The process by which a company evaluates and classifies risks and measures and calculates the cost of protection, within the framework of the rules, rates, and coverage forms that are permitted by law in a particular state.

Underwriting Profit or Loss - The amount of money which an insurance company gains or loses as a result of its underwriting operations. A net gain or loss on underwriting operations represents a company's statutory underwriting profit less any amount it may pay to its policyholders in the form of dividends. It excludes amounts derived from investments.

Undue Familiarity - Any physical touching of any person, or any other demonstrated intention, for the purpose of sexual stimulation.

Unearned Premium - That part of a premium that applies to the time that an insurance policy has yet to run.

Utilization Review - System of review conducted by professional health personnel, of the appropriateness, quality of, and need for health care services rendered to the patients.

Verdict - A formal decision or finding made by a jury or judge. A verdict is made in favor of either the plaintiff or the defendant. Damages may be awarded when a verdict is made in favor of the plaintiff.