The infectious disease exclusion is an exception found in a significant minority of physicians’ professional liability insurance policies that excludes coverage of claims caused by the transmission of infectious diseases. The wording of this exception usually consists of two parts. The first part excludes coverage for claims caused by a doctor’s refusal to treat a person who has (or is suspected of having) a communicable disease. The second part of the exclusion excludes coverage of claims in which a patient alleges that an insured doctor passed on an infectious disease to the patient. The rationale for the first part of the exception is that, with proper precautions, even patients with infectious diseases can usually be treated without endangering the doctor or other staff. The rationale for the second part of the exclusion is that, given the nature of the doctor’s job, it is usually possible for the doctor to know if he or she has contracted an infectious disease. Therefore, physicians who know they have an infectious disease should not practice medicine until the disease is completely cured. Accordingly, many policies exclude coverage for claims related to a doctor passing on an infectious disease to a patient he or she is treating.
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).