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Medical Malpractice Insurance
Medical malpractice insurance is a specialized type of professional liability insurance that covers physician liability arising from disputed services that result in a patient’s injury or death. Medical liability insurance is required in almost all states and most medical systems as a requirement to practice.
Malpractice insurance is usually available through traditional insurance carriers or from a medical risk retention group, which is a mutual organization of medical professionals organized to provide liability insurance (sometimes sponsored by state medical societies). Additionally, some large medical systems may be “self-insured;” instead of purchasing commercial insurance, a medical liability trust fund is created that is used to pay for defense of malpractice claims and any resulting judgments against their physicians. Although it is possible for smaller medical groups and practices to self-insure, there are significant legal and business obstacles that make this a difficult option for most.
Individual and group malpractice coverage plans are available for those in independent or small practices. For employed physicians, medical liability coverage is typically offered as part of a group plan purchased by the employing hospital or health system.
The optimal type and amount of insurance you need to meet your state’s malpractice insurance minimum requirements and for adequate personal and practice asset protection may vary greatly based on your individual circumstances. Therefore, it is important to confer with a professional medical insurance consultant or institutional risk manager to determine the appropriate type and amount of coverage for your particular practice situation.
It is important to understand the two basic types of malpractice insurance: "claims-made" and "occurrence." A claims-made policy will only provide coverage if the policy is in effect both when the incident took place and when a lawsuit is filed. As can be seen, this requires that coverage must extend for a significant period of time to provide adequate protection since a considerable amount of time may elapse between when an incident may have occurred and when a claim is made. Because of this, some claims-made policies are written to provide a period of coverage referred to as a “tail” that extends coverage for a set amount of time (such as five years) after a policy ends. If not offered as part of the original policy, tail coverage may also be purchased; the cost of tail insurance is typically a one-time assessment that can be as much as 1.5 to 2 times a typical annual malpractice insurance premium. Tail coverage, however, is extremely important in situations where you have been covered with a claims-made policy but are changing insurance carriers, moving to a new position, or are retiring, to ensure continued malpractice coverage during these transition times for incidents that may have occurred in past years. The costs of tail coverage may be covered by your previous practice to ensure adequate protection of their group assets, or by your new practice either as a benefit or an inducement to join the group. Tail coverage may be an appropriate item of negotiation with a prospective new practice.
Occurrence policies differ from claims-made insurance in that they cover any claim for an event that took place during the period of coverage, even if the claim itself is filed after the policy lapses. In general, this type of policy does not require tail coverage, although this type of insurance is usually significantly more expensive and less frequently offered by employers.
It is also important to understand the finer details of your medical malpractice coverage. Policies typically cover a range of expenses associated with defending and settling malpractice suits, including attorney fees, court costs, arbitration and settlement costs, medical damages, and punitive and compensatory damages. Medical malpractice usually does not cover liability that arises from criminal acts or sexual misconduct. It is critical to know what your insurance policy would specifically cover and what it does not to make sure you are adequately protected. It is also important to know the amount of coverage for each occurrence and all claims that may be made against you. Although some states require minimum amounts of coverage for both the amount per each claim and the total of all of the claims that may be made, it is important to discuss the potential need for additional coverage above these minimums with a professional malpractice insurance consultant or institutional risk manager to ensure that your personal assets are protected.
If you are entering a private practice, remember that in addition to medical liability claims, medical practices also face potential claims associated with other medically-associated risks such as cyber liability and regulatory requirements such as compliance with the Health Insurance Portability and Accountability Act (HIPAA). Some medical malpractice policies may cover these types of exposures; if not, separate policies to protect against these risks are usually available.