Common Mistakes Some Smart Women Still Make With Money, Estate and Legal Planning

WOMEN AND WEALTH
I’m fortunate to deal with a number of successful women across the U.S. Whether they are C.E.O.s, doctors, some other kind of professional or business owner or simply the stay at home family C.E.O. that helps manage the family’s wealth and success.

Over the last ten we’ve seen both positive and negative behavior patterns among different demographics, including women, repeated on a consistent basis. While these issues certainly aren’t exclusively things that women do, they seem to be at he forefront of many of the problems that we have to help them through.

Some Common Errors:

  1. Letting their husband/significant other mange the finances in a vacuum, this can be financially fatal in the event of a death, divorce or illegal act by the husband (think Mrs. Madoff);

  2. Being underinsured on their own life, disability and long term care insurance. I often see couples with millions in life insurance on the husband and only a courtesy $250K on the wife;

  3. Not protecting wealth and being proactive about risk. Many women are great earners and great spenders but overlook the exposures that could put everything they own at risk – they need to understand Asset Protection planning, at least at a basic level;

  4. Working on trust instead of with formal legal agreements like contracts;

  5. Being “too nice for their own good”  and not ending relationships that are negative and toxic, both personally and professionally with employees and partners.

  6. Paying themselves LAST. Many successful business women put the business, employees and family before themselves and their own savings and solvency, you can’t be generous if you’re broke, protect the source;

  7. Not getting a prenuptial agreement;

  8. Not getting what is owed to them out of pride, aversion to conflict or frustration, the old, “They owed me more but I was just mentally done with it and wanted to move on”. Great, move on with your money.

  9. Not knowing where key documents are and who the players in their financial and legal world are. you should be able to tell me the name of your lawyer and financial advisor without having to look it up.

I realize this may sound chauvinistic, it’s not. Take it as  the observation of someone who has dealt with these issues for a very diverse national client base for a decade. A list of issues and bad behavior specific to men would be even longer.

LIfe Insurance for Doctors and Business Owners – Key Due Dilligence Questions for Buyers

LIFE INSURANCE STRATEGIESThe last two weeks of the year is high selling season for life insurance polices as doctors rush to fund various retirement plans and as advisers take advantage of year-end wealth-transfer opportunities and favorable deals sometimes available from insurance companies. Knowing the right questions to ask about an insurance policy is a key issue for physicians, especially considering the significant investment often involved and the exit costs involved in buying a lemon.

Covering all the options and nuances available in the life insurance marketplace in anything less than book form is nearly impossible. The following are core concepts to be aware of that are the most basic and generally applicable.

What is my annual premium and can it change?

This is the amount the insurance will cost you every year. In some case this number is fixed and in other cases it can change based on variety of factors such as the performance of the stock market and other indices. Make sure you understand your obligations and what you will lose or be left with if you don’t make what the policy expected and what was actually illustrated.

Show me the policy illustration.

I see lots of bold promises and spit-ball estimations of future performance made by advisers. The policy illustration is all that matters, so any conversation about what could happen if the policy exceeds the expectation that the illustration creates is moot; don’t engage in it and instead ask about the “minimum guarantees” if one exists at all. That’s the minimum you’ll earn in the policy if the worst happens. Remember, the column on the far right in most illustrations is the “perfect world” scenario, so look at and have the others explained as well.

Does this policy have a cash value?

The cash value is the amount of premium that builds up inside the policy and that may be available to the policy owner in the future. Some policies, like term insurance, have no cash value, while others have it immediately and some build it up over time. Be clear if yours does and exactly when it will be available if you need it and under what terms.

Is my policy protected from creditors?

We’ve covered the tactical use of high-cash-value insurance with this feature before. Know what the laws in your state of residence are and if your policy and both the cash value and “death benefit” (dollar amount paid upon your death) is protected by law or not. Asset protection of liquid assets is always a key focus of my concern. If the law is not in your favor, some simple trust planning can often protect your policy from both estate taxes and more active threats.

How long will my policies last?

Again, this goes back to the illustration and specifies how long the coverage will be in place at a specific cost and what the death benefit will be through the term of the illustration. In some cases, keeping the policy alive may have significant increased costs while in others you may be able to reduce the death benefit to keep the premiums level or to stretch the policy for a longer period of years. Find out how flexible your policy will be in the future and weigh that as part of your risk-and-liquidity analysis.

What’s my exit strategy?

Find out what happens if you can’t or don’t want to continue to make premium payments. With term insurance you usually lose what you paid; that’s OK, think of it the way you might car insurance. Other policies that were structured to have a future cash value or that have a current cash value early on however may have significant “surrender penalties.” Know what happens if you walk away and what options the policy may provide, including the specific surrender penalties that may be imposed in the policy. The carrier could, for instance, keep all the cash value you built up if you don’t keep it for a minimum number of years.

 

This list just scratches the surface and is deceptively simple. Our goal here was to introduce some of the key concepts and questions you must be familiar with, so you can do your own due diligence on when buying life insurance, whether a simple term policy or a complex premium-financed strategy with a triple-reverse galactic split dollar that includes a trip to the Bahamas to read the policy.

My thanks to Jeff Christenson, president of Christenson Wealth Management in Phoenix, Ariz., for his significant contribution to my education on these issues.

Asset Protection with Offshore Trusts – The Cook Islands

OFFSHORE TRUSTSThis article is somewhat sensational (like most lay-articles on the subject of Asset Protection)  in that it focuses on the “bad users” but the science is still sound.

There are likely more people abusing tax deductions and self-directed IRAs than the kind of well timed and tax neutral offshore trust planning which we’ve helped 1000′s put in place legally.

I’m still a big believer in the Offshore Asset Protection Trust when done right. This means:

1.  Fully disclosed and with no abusive tax plan involved;

2.  Done by a professional; and

3. Done with no pending creditor issues.

SEE THE NEW YORK TIMES ARTICLE HERE:

http://preview.tinyurl.com/COOKTRUST

 

See the

Key Legal Documents Everyone Facing a Divorce Must Update

DIVORCE

A common error after the expense and trauma of a divorce is not updating a variety of key legal and financial documents. You would not believe the number of estate plans and insurance policies that name an ex-spouse as the beneficiary of everything a client owns.

Jeff Landers of Bedrock Divorce advisors provides a great summary in the article linked below from FORBES.

SEE THE WHOLE STORY HERE:

http://tinyurl.com/DIVORCEUPDATES

 

 

 

 

Holiday Shopping, Cyber Crime and Personal Secuirty – Asset Protection

Holiday ScamsWhether you are a Black Friday, Cyber Monday or everything in-between shopper, the number of threats to your wealth and assets both in person and online at a  high at this time of year. Here are some issues to look out for to protect yourself, your family and the joy of the Holidays.

Yes, this is different from what you usually see from me, but Asset Protection is first and foremost about managing RISK, not just lawsuits. Below are two of my most recent columns for Physicians Practice that apply to everyone and center on financial scams and crimes of opportunity that are even more prevalent during the  holidays.

 

Financial Safety Tips to Protect Yourself from 5 Holiday Cyber-Scams

The holidays provide extra opportunity for a variety of theft and financial-fraud scams, many targeting affluent victims like physicians. This week take a first look at some common scams and safety precautions every family should be aware of.

1.      Charitable Donation Scams. This form of fraud has many incarnations but among the most common ones is mimicking a known charity with a look-alike name and presentation. Be sure the organization you are donating to is legitimate and the one you actually intended and avoid giving checks to unknown people or entities; once they have a check from you they can easily use the routing numbers to generate checks and other payments to themselves or to buy merchandise online.

2.      Credit Card Scams. Check your credit card statements carefully. Thieves take advantage of higher than average bills and unusual charges that appear on the statements of many American families at this time of year. This “smoke screen” provides good cover for charges that may be incurred by someone who has obtained your credit card number. Don’t just look at big charges, they’ve figured out you are likely to spot those and often use a series of small charges to avoid detection.

3.      New Account Scams. Consider checking your credit report for new accounts at year-end or early in January at the latest. At this time of year most major retailers are in a rush to open new credit accounts to get us to buy and often use huge extra savings and promotions as enticement, like an extra 20 percent off the day you open the account. Harassed retail staff may not be as vigilant about checking IDs, and opening such accounts at this time of year would not be unusual activity with retailers, your bank, etc.

4.      Smartphone scams. Be suspicious of your smartphone. E-commerce has forced retailers into a steady migration toward more mobile shopping and banking and the scammers came with them. Top scams-technology watchdogs are warning consumers about text messages with links to bogus sites that may steal your identity or credit card information or even infect your phone with a virus. Similarly, be careful of the apps you use and download, especially if you are buying from small, third-party resources instead of “factory” stores like Apple’s iTunes Store and the Android App store. These smaller sites can’t vet and test the apps as carefully and are often used by people whose phones have been unlocked or “jail broken” to allow features and software the manufacturers didn’t want on your phone. Watch your kids and how they’ve altered their phones, especially teenagers who may be shopping online with your card.

5.      Debit-fraud scams. Use credit cards instead of debit cards or checks as much as possible. A variety of debit-fraud schemes have been exposed lately and I’ve just never believed that using a payment function directly linked to your bank account balance was a good idea. Using credit cards, even if you pay them off in full at the end of the month, reduces your exposure significantly and provides an opportunity to dispute charges that are not yours, get purchase protection for loss, theft, or damage with some cards and even have recourse against dishonest retailers with shoddy or undelivered products.

This list just scratches the surface; we’ll provide a few more tips next week including some personal safety issues and social media related exposures you can avoid with a little information and a word of caution.

More Holiday Scam Advice and Safety Tips – PERSONAL SECURITY

Last week we introduced a variety of holiday banking and credit-related scams that target your family and finances and are more prevalent than ever in the age of digital currency.

We take a look at some other common exposures in this week of Black Friday, including some personal safety issues and tips to help you avoid being an easy target. Many of these issues arise in your daily routine and even at your home itself, while others occur when so many of us travel away from our homes for extended periods of time.

Packages and deliveries. The bad guys know that you are shopping online, and if they’re not trying to hack you they are happy to make a buck the old fashioned way; by actually stealing goods from you. They are aware that packages will be delivered and left outside the homes of millions of Americans and the narrow window between the time it was dropped off and the time someone gets home and picks it up is increasingly enough time to follow the familiar UPS and FedEx trucks as they drop off a variety of holiday surprises including all those things you carefully picked out from your favorite catalogs and websites.

Some basics:

Require a signature for important deliveries. A dreaded trip to the post office to pick it up is guaranteed to be less of a hassle than three trips to file police reports and make insurance claims.

Always have your packages shipped insured and with a tracking number at this time of year. The extra shipping expense is typically a fraction of what will be lost if the package is lost, stolen, or damaged at this high-volume time of year.

Avoid letting packages sit outside, as it attracts unwanted attention from the wrong people and is a good sign that no one is home, which may lead to further exploration for other goodies actually inside your home.

Be very careful about always locking your vehicle, and never leave packages and shopping bags in any plain view; use the locked trunk of your car if possible. I am continually surprised to see computers, tablets, briefcases, phones, and even expensive headphones sitting on car seats in shopping malls and other public parking lots. These are all hot targets that are easily sold and often hard to trace. Of course, always take a glance at the backseat to make sure the car is actually empty before you get in.

Be vigilant and watch your back, literally. Petty crimes like purse snatching, pickpocketing, and the like are easier for criminals when they know you are distracted by a long shopping list, an armful of packages, and often a family entourage. Theft of your bags and packages inside the mall or store itself is increasingly common as well so count your bags and watch them at all times or you may end up getting home and discovering a couple of items you paid for are missing. This recently happened to a friend of mine who put his exceptionally expensive designer sunglasses in a leather case down on a table less than a foot from himself for a moment in an Apple store (in a very upscale suburban shopping center) while paying for a product. When he turned around they were gone; the whole thing took about a minute.

Give the smart way. Panhandling is also big business at this time of year, playing in part upon your holiday spirit and partly on your guilt of walking out of a store with arm loads of frivolous purchases while someone forlorn looking asks for help, most typically for bus money to “get home” or to get something to eat. Be aware of the exceptionally vulnerable and tempting position you put yourself in when you pull your wallet out in front of a stranger, typically in parking lot or other public place where they feel no one is watching.

The purpose of this column is not to scare you out of enjoying the holidays; quite the contrary. It’s intended to give you an introduction to some exposures to be aware of and to proactively identify and avoid so your holidays are happy and free of (additional) stress. Be safe and Happy Holidays.

Essential Legal and Financial Documents, an Emergency Checklist

VITAL LEGAL DOCUMENTSFinding key documents can be trying and laborious under the best circumstances, even with plenty of notice, like at tax time every year. Finding them under stress or worse, having to have someone else sort through the entirety of the paperwork you have hoarded after an emergency, death or other crisis is often impossible. This is the list of the most essential legal and financial paperwork that you should be able to lay hands on or instruct others to easily find.

The bare-bare bones documents everyone should have available

  1. Passports. Make sure they are current and useable. If your kid is off on a summer abroad and gets hurt, it will certainly be the wrong time to discover that your passport is expired (true story) and that you have to wait for the government to reopen and for your passport to be processed.

  2. Copies of other identification. Driver’s license, social security card or other legal forms of ID including a birth certificate that is often required to obtain other documents.

  3. Insurance policies. Life, Property, Liability, and Health are four most basic key areas, we’ve covered many more in previous articles .  I’d hate to go on what Allstate (or any carrier) felt like paying me on my homeowner’s policy on good faith alone if my home was damaged or lost in a flood or hurricane. Having a copy of these actual policies is key in demanding service, coverage and in enforcing the actual contract if required. Similarly, health insurance cards are often kept in places that can be lost or stolen, like wallets and purses – if you’ve ever sat in an emergency room and seen who gets treated first and how well, you’ll get this.

  4. Essential Corporate and Business Document Including Bank Statements. If you have corporate documents that control chain of command, ownership, title, account balances and succession, you better

    know where they are. I am continually amazed that how many doctors don’t have copies of their corporate documents, adding stress delay and expense when they are needed, as in a lawsuit between partners in a medical practice. In that case, you may be stuck with copies that may or may not be accurate.

  5. Mortgages and deeds. These are perhaps the most overlooked, lost and disrespected documents we come across. Odd since it is the single largest asset of many doctors.

  6. Medical records and prescriptions. This is the most subjective, but if you or a family member have a complex medical history or require prescription drugs to function at a basic level, having copies of the prescriptions at issue is essential, especially during emergencies.

  7. Estate Plan. We assume you have one, whether a basic will or a more sophisticated series of trust of various types and that you’ve updated it  and that you have avoided common mistakes. It does no good if we can’t find it and don’t know who’s in charge.

How and Where should they be stored?

The conventional wisdom, and likely they safest bet, is the bank in a safety deposit box. That said, it may be impractical or subject you to delays based on their hours and a variety of other conditions including the substantial limits on access by third party agents you may want to have possession. Would the person you send be able to get into the box, including your own children?

Home and office Storage. Invest in a safe that is both waterproof and fire rated to withstand most common house fires. “Too big” or “too expensive” is not a valid excuse for almost anyone reading this. Costco, as one example, has large fire-rated safes that will hold guns, laptops, jewelry and documents for as little as six hundred dollars, entry level small safes are a fraction of that cost.

Consider which documents are sufficient if you have a copy, like an insurance policy and which require originals, like a passport. Consider keeping the original paperwork for which copies are an acceptable substitute in the bank and the reproduced copies at home. The most prepared also have copies of documents they actually keep on hand at home (like passports) saved somewhere else as most of us don’t have those details recorded or memorized. Do you know your passport number by heart?

All my personal clients from this month forward will receive electronic copies of their documents, instructions, filings and signature pages on an encrypted “key drive” to help in this process. That drive also allows other documents to be added to it and is encrypted to a high security level.  Don’t make electronic copies the primary source; it limits you to times when you have power and computer/internet access, a significant variable for folks in a natural disaster, as one example.

Asset Protection and Wealth Preservation Attorney and Author to Speak on in Maui, November 21st, 2013

A Seminar About Protecting Your Wealth and AssetsFOR IMMEDIATE RELEASE:  

Maui, HI.  November 17, 2013.

Asset Protection Attorney Ike Devji will be the featured guest speaker at a November 21st, 2013 educational seminar for doctors, business owners and other high net worth individuals sponsored by Ronsman & Associates, a wealth advisory firm serving specially qualified clients in Hawaii, Arizona and Alaska.

 

The complimentary event will be held from 5:30 to 7:00 PM at the Maui Beach Hotel’s Molokai Room.

Attorney Ike Devji will share insight gained as a former litigator who has spent the last decade of his legal career helping thousands of successful individuals across the United States protect over $5 Billion dollars of their personal assets from litigation, risk and other variables.

“We are at a point where we have 70,000 lawsuits filed per day in the U.S., and Hawaii is not immune to this issue, or the many other areas of risk management not addressed by basic liability or malpractice insurance that continually take successful people by surprise”, said Devji. “Wayne Ronsman, President of Ronsman & Associates, has many existing Maui clients who he originally wanted to share this vital educational content with and he decided to make it available to general

Maui community as a public service. Wayne understands that it’s not just what you make, it’s what you keep, and the most successful Americans are more worried about loss than growth right now. We are going to make sure they have a starting point in defending their success in plain English.”

The seminar will common cover the risk picture in the U.S. and address key issues like the difference between traditional estate planning and asset protection planning and a variety of key issues that must be addressed by every doctor, business owner and executive. Ike Devji is a national speaker, author and educator on the area of his practice and was recently a guest speaker at ACR 13, the annual convention of the American College of Rheumatology in San Diego.

He is the former managing of attorney of one of the United States leading asset protection law firms and has been listed among a select group of WORTH magazine’s “Leading Wealth and Legal Advisors”, is rated a “Perfect 10.0 by AVVO, appears on various Top Lawyer lists and has literally hundreds of nationally published articles in publications including Financial Consultant, Advisor Today, Public Accountant, countless medical journals (with over 130 articles for doctors at Physicians Practice alone), in addition to being a contributing author to the book, Optimal Financial Health. He has also recently completed an CME (continuing medical education) course for doctors at the request of the American Educational Institute (AEI) that will be shown in AEI’s marquee classrooms all over the U.S 1000 times in the next 12 months.

For his part, Wayne Ronsman brings Maui 40 years of financial industry experience with high net worth clients like doctors and business owners and is the Founder and President of the Benefit Institute which is in the business of providing financial services. The Company works extensively with Trust Officers, CPA’s and Attorneys, frequently playing a key role in finding solutions to their clients’ tax and estate problems and in taking advantage of their existing financial opportunities. Part of this work includes finding experts in other fields that are vital to persevering his clients’ success and using them to educate and serve his clients.

For More Information or To Reserve a Seat:

Wayne Ronsman, President, The Benefit Institute

toll-free at (877) 759-2181 EMAIL: wjronsman@msn.com or FAX to (480) 460-5748

Website: http://waynejronsmanassociates.com/About.html

FOR MORE INFO ON THE SEPAKER:

Ike Devji, J.D. Managing Attorney – Pro Asset Protection

(602) 808-5540 EMAIL: ID@thewealthy100.com

Website: http://www.proassetprotection.com

Tagged: Lawsuits, Asset Protection, Wealth Preservation, Maui, Hawaii, Doctors, Executives, Physicians, Business, wealth, Wayne Ronsman, Ike Devji, medical, seminars, continuing education, CME, medical practice management, CEO, entrepreneur, Business Owner, CPA

 

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Dating Website Faces $20 Million Lawsuit Over Employee Injury for Typing

A key area of asset protection planning for our 1000′s of business owner clients is the danger of employee lawsuits.

Ashley Madison dot com was recently sued over a repetitive motion injury allegedly incurred by an employee that makes up the fake profiles on the site. She was then photographed rising jet-skis and engaging in a number of other activities unlikely to be possible for someone with that injury.  The employer and their legal counsel are fighting back, and social media is playing a key role.

See The Story Here:

http://www.businessinsider.com/ashley-madison-strikes-back-against-plaintiff-2013-11?nr_email_referer=1&utm_source=Triggermail&utm_medium=email&utm_content=emailshare

 

 

Personal Liability Insurance Umbrella Policies Remain Vital Asset Protection for Doctors, Business Owners

Slide1The law, like medicine, offers few absolutes: Personal liability umbrella policies are not a “magic bullet” that either always or never works.

Despite their limits, they remain a key tool in your personal asset-protection plan and your most essential (and affordable) first line of defense.

We’ve discussed the fact that many doctors and business owners have wrongly relied on their umbrella polices to provide greater protection than they reasonably can. In a previous article I highlighted a few simple issues to consider like gaps in either the “depth” of insurance meaning the limits of the coverage as well as the “width” of the coverage, meaning how many specific exposures the policy itself actually says it covers. To follow that up, we also covered a list of the most essential types of specialty liability insurance every doctor and entrepreneurial business owner needs and that almost no umbrella policies cover.

Surprisingly, this simple and cost-effective shield is often overlooked by both physicians and their insurance agents. This gap has proven to be disastrous for numerous doctors and other successful individuals I’ve personally spoken with over many years including three families that have been informed their liability insurance limits will be inadequate to cover damages in the last 30 days alone. A simple look at U.S. government statistics on auto accidents, as just one common exposure where an umbrella policy may be essential, shows us why.

There are approximately 11 million auto accidents in the U.S. per year according to U.S. Census Bureau statistics, resulting in 40,000 fatalities. Using even the crudest average, that means there are 800 fatal car accidents in your state every year.

Not a single one of the unfortunate souls involved in this statistic ever left their home in the morning imagining that they would be involved in accident that would change the lives of all involved forever.

Given the litigious climate we live in and the actual damages that such a tragedy produces, it’s not surprising that many of these accidents result in seven-figure lawsuits. In my state of Arizona for example, three of the top ten lawsuit verdicts of 2012 were for auto accidents, all were for over $5 million. Could your family and business survive such a verdict?

In most cases the answer is no, and even those who do have an umbrella rarely have more than one to two million dollars in coverage. This does not mean it is hopeless and you should just give up (this actually is a common response). It just means you need to understand the limits of what your umbrella actually covers and for how much and take proactive measures to organize your wealth so that any exposure is limited to the scope of the policy. A simple analogy is you locking your home and setting the alarm every day despite the fact that a window could still be broken. The lesson is always “take all the steps you can.”

Key Points to Remember:

1. Umbrella policies are not magic shields against anything that might happen, no matter how much it costs.

2. They are an essential first line of defense and the most cost effective and basic first step in your asset-protection plan. In many cases a one million dollar umbrella can cost just a few hundred dollars a year.

3. They have limits that are very clearly defined by the insurance company.

4. If the personal liability umbrella, the one that’s typically related to your home and auto coverage, is what you are considering, it probably won’t cover issues not reasonably related to either of those base policies in most cases. So, for example, a dog bite that occurs at your home may be covered but a lawsuit by an employee almost certainly will not.

5. My advice to clients is buy every dollar of insurance you can reasonably afford for as many reasonably predictable risks as possible. Assume there will be a gap in the coverage at some point and be a hard target beyond the policy itself.

6. Implement an asset-protection plan that legally separates your personal and professional assets and liabilities today, while you still have right to do so. I get dozens of calls a year from people who were too busy making money to protect what it took decades to earn.

7. Don’t go on ego, “I’ve never been in an accident” or your personal assessment of what you think your risks are, “we don’t have kids who drive.” They are called “accidents” for a reason and I see as many that result from safe adult driving as I do with teens and young adults.

 

This article originally appeared in another form at www.PhysiciansPractice.com, The Nation’s Leading Practice Management Resource, where Asset Protection lawyer Ike Devji has over 100 bylines and is a regular contributor.

 

Employees, Financial and HIPPA Data Create Risk for Medical Practices and Business Owners

BUSINESS AND MEDICAL PRACTICE OWNER LAIBILITYHIPAA and financial data present an ongoing asset-protection issue for physicians and medical practices. This week we take a look at a specific exposure suffered by up to 40,000 (yes, 40,000) patients of one Arizona medical practice and some simple precautions that may help your practice avoid the same exposure. 

While written for doctors, this applies to ANY business that handles HIPPA protected info or client financial data like social security numbers, account numbers, credit cards, etc.

Recent news reports from Scottsdale, Ariz., detail the alleged activities of a medical billing firm employee and her boyfriend. According to news reports, Brittany Davidson and her boyfriend Winfred Aurelious Dick, Jr., were arrested after a Maricopa County Sheriff Captain spotted an unauthorized charge on his credit card. Further investigation revealed Davidson had reportedly stolen his credit card information from the medical billing firm where she worked, which handled billing for a Scottsdale dermatology clinic.

As a result, the financial data of as many as 46,000 patients may have been exposed by the duo that used patient credit card numbers for items ranging from rims and tires to fast food. The practice, Scottsdale Dermatology, has offices around the city and data from multiple offices was potentially exposed by the billing company’s security breach.

 

What Could Have Helped?

 

  1. 1.    Cyber liability insurance.

We’ve previously covered a variety of vital forms of commonly overlooked medical-practice insurance policies, and discussed the importance of data breach or cyber liability policies, which we can only hope the practice owner has in place here. These policies cover a variety of issues in our increasingly electronic world, including not only outside theft or loss of medical records but also the intentional misuse of patient data by employees. In this case both the medical practice and the billing company, which is likely a “business associate” of a covered entity, face substantial liability for a variety of issues including:

 

• Any actual losses incurred by patients;

• The expense of formal notification of over 40,000 patients;

• Ongoing remediation including credit monitoring and credit repair for those actually exposed;

Reputational damage and loss of patient trust.

 

I’d also add that EPLI, or employment practices liability insurance, could prove useful in such a situation. While much of my previous coverage of this vital issue has centered on its value in protecting a doctor’s office from an employee lawsuit, the best policies often include riders that protect the employer from the liability associated with the unsanctioned actions of an employee as well.

  1. 2.    Background checks and proper employee credentialing.

In this case the billing and subsequent breach occurred at a third-party company that we can only hope was properly credentialed and met the specifications of the dermatology practice’s third-party payer contracts. It could just as easily have been at the doctor’s office itself. Part of your HIPAA security procedures should include a discussion of the entire chain of custody of the records your practice handles and discloses to third parties and that review should include questions about any third party’s background-screening practices. Find out if they indemnify you for their loss or misuse of the information you share with them, and get a copy of their “in-force” liability policy that covers you in the event of such a breach.

 

I can only hope some phones are ringing on these issues at billing companies across the country later this week.