The Medical Record Amendment Exemption is an exception found in most forms of physician liability insurance that excludes coverage of medical record amended claims. The following scenario shows how this exception would be applied. The anesthesiologist applies the wrong type of anesthetic to the patient, given the nature and duration of the operation being performed. As a result of the mistake, the patient wakes up before the completion of the operation and ends up suing the anesthesiologist. But before getting the lawsuit, the anesthetist changed the patient’s medical record to indicate that he was using the correct type of anesthetic. This exclusion would exclude coverage of a patient’s lawsuit, given the dishonest conduct of an anesthetist who intentionally altered a patient’s medical record in an attempt to absolve himself of liability. The rationale for this exception is that, in the vast majority of cases, when doctors change medical records, they do so in an attempt to remove or eliminate evidence of their medical negligence in treating a patient. Accordingly, insurers do not intend to cover willfully dishonest behavior of this kind.
Insurance is a contractual relationship that arises when one party (the insurer), for a fee (premium), agrees to compensate the other party (the insured) for losses caused to a certain subject (risk) caused by certain unforeseen circumstances (hazards or dangers). The term ‘guarantee’, commonly used in England, is considered synonymous with ‘insurance’.
The 10/10 Rule is a matter of analyzing and demonstrating the transfer of risk as a precondition for the use of reinsurance accounting, which was codified in the early 1990s with the adoption of Financial Accounting Standard (FAS) 113 (and its statutory counterpart, SSAP 62). FAS 113 itself was a response to alleged abuses and set the standard for testing whether something should be called an insurance contract. FAS 113 required that the transfer of risk be demonstrated by comparing the present value of the cash flows associated with the contract and, in particular, by exceeding certain thresholds of “significance” of risk. The thresholds, often referred to as the 9a and 9b tests, are: 9a. The reinsurer assumes significant insurance risk under the reinsured parts of the underlying insurance contracts. 9b. It is possible that the reinsurer could suffer a significant loss from the transaction. While neither “significant” nor “reasonably possible” was defined in this context, standard rules of thumb quickly emerged in the implementation of FAS 113. The most commonly cited is the “10/10 Rule”. This rule states that a contract reaches a threshold if there is at least a 10 percent chance that it will suffer a loss of 10 percent or more in present value (expressed as a percentage of the contract premium ceded).