Malpractice insurance 101

doctor to show medical malpractice insurance
Health care providers are vital contributors to society. Doctors, nurses, and other medical professionals heal our injuries, cure our illnesses, and maintain our overall well-being. They are among the best educated and most rigorously trained workers in any profession.

But like any professional, health care providers make mistakes. When these mistakes happen, harm can come to patients, clients, and their families. As a result, any of these parties may sue the medical staff involved in their care. If you are a medical professional, you are also at risk of a malpractice lawsuit. However, with the right coverage, you can stay protected.

That’s where malpractice insurance comes in.

What is malpractice insurance?

Malpractice insurance is a special type of professional liability insurance tailored specifically to a given field (medicine). While lawyers and certain other professionals also have forms of malpractice insurance, the term “malpractice insurance” usually refers to medical malpractice coverage for healthcare professionals.

Malpractice insurance protects and supports doctors and other health care providers when patients or clients file a lawsuit against them for negligent (or intentional) malpractice.

Malpractice has high stakes

Malpractice insurance is unique in that the claims it protects against can be quite large. Average out-of-court settlements average around $425k, and jury awards average over $1 million.1 Just last year, a jury awarded a sum of $229 million in a malpractice suit.2

Who does malpractice insurance cover?

Medical malpractice insurance covers both individual medical professionals and medical practices. This includes, but is not limited to:

  • Doctors of all kinds Physicians, surgeons, etc.
  • Doctors’ offices
  • All medical staff within the practice
  • Hospitals
  • All medical staff (nurses, physician assistants, etc.)

Medicinel-adjacent fields and practices, including some physical therapy and cosmetic surgery outfits, are not always covered by malpractice insurance.

What does malpractice insurance cover?

Like other kinds of professional liability insurance, malpractice insurance covers errors and omissions (E&O) related to various medical professions. Typically, these directly involve patient care and resulting harm, but research conduct is also covered in some cases.

Legal expenses

While physicians do win most cases of medical malpractice, there are still considerable legal expenses involved in reaching that verdict.3

Malpractice coverage covers many expenses involved with the legal process of a malpractice dispute, including but not limited to:

  • Arbitration
  • Representation and court fees
  • Settlements
  • Damages
  • Punitive
  • Compensatory
  • Medical

This last category, medical damages, is usually the most involved.

Medical damages

A malpractice suit typically happens because a patient has been harmed. In addition to the physical and psychological damages, the victim is also often burdened with a host of medical expenses they seek to recover.

In a settlement or award payment, the medical expenses of the claimant are often covered. These include but are not limited to:

  • Medical fees already incurred
  • Products (medicine, devices, etc.)
  • Services (consultations, etc.) 
  • Procedures
  • Future (immediate to long-term) products, procedures, and services
  • Responsive and preventive care

Experimental trials and research conduct

When health care providers prescribe or recommend medical products or services to patients, they are obligated to notify patients if those products or services are part of an experimental trial. Patients have a right to an informed decision, and while the specifics of that right vary from state to state, violating it can be grounds for a malpractice suit.

In addition, if health care professionals’ conduct in peer-reviewed research is unethical and leads to a loss of income for an individual or entity, there may also be grounds for a malpractice lawsuit.

What malpractice insurance typically does not cover

There are things that medical malpractice insurance coverage does not cover. Some of the most important ones include:

  • Claims of fraud – These are claims that you have committed or facilitated fraud, such as medicaid fraud.
  • Patients’ non-medical disputes – These are claims about other conduct, such as theft or mishandled records.
  • Employees’ disputes – These are claims that are workplace- but not medical-related, such as payment and employment.

Claims-made and occurrence-based policies

This type of insurance policy is also unique in that claims may occur long after the instance of malpractice. Given the long-term and sometimes slowly-developing impacts of healthcare, claims may be made that pertain to a period of coverage that’s no longer current.

That’s why the differences between an occurrence policy and a claims-made policy are important:

Occurrence – This kind of policy covers claims regarding things that happened during the term of coverage, even after coverage has been cancelled.

If you had occurrence coverage from 2005 – 2011, but cancelled in 2012, a claim filed in 2020 about something that happened in 2007 would be covered.

Claims-made – This kind of policy covers things that happened within the coverage period only until a stoppage of payment, unless other agreements are reached.

If you had claims-made coverage from 1986 – 2010, but cancelled in 2011, a claim made in 2017 about something that happened in 2007 would not be covered.

You can cover events after cancellation by purchasing a “tail” (at the same or a higher premium) or switching to a new company that agrees to take over the existing coverage.

Do you need coverage?

If you’re a health care professional, or aspiring to be one, you probably need medical malpractice insurance coverage. Legal requirements vary by state, but if you work for an institution, you may already be covered by their plan.

If you have your own practice, or you’re looking to start one, you’re likely legally obligated to seek out coverage.

Other kinds of coverage you might need

In any medical practice, there may be a need for additional kinds of coverage beyond malpractice insurance.

As mentioned above, claims involving non-medical disputes aren’t covered by malpractice insurance. Thus, professional liability coverage can offer protection from various kinds of business-related exposure. Policies can cover specific areas of concern, such as worker compensation and fraud.

In addition, exposure to harm that’s neither medical- nor business-related, such as theft or damage to equipment, is the domain of general liability coverage.

Sources:

Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.

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DISCLAIMER: The information contained on this page is intended to provide general information only. For specific legal advice, please contact an attorney. For advice regarding your particular insurance needs, you should speak with your broker or agent to ensure that you have the appropriate coverages and limits.