Malpractice Insurance: What You Need to Know
Malpractice insurance is a type of professional liability insurance intended to cover healthcare professionals. Legal costs, punitive damages, and medical damages are all covered under malpractice insurance.
Claims-made policies and occurrence policies are the two most common types of professional liability insurance. Malpractice insurance pays for legal fees, punitive damages, and medical expenses.
If you’re a practice shareholder, you’ll need even more information to make informed judgments about selecting a carrier, negotiating policy alternatives, and allocating premium costs to individual physicians.
If you work for a self-insured organization, such as some county and university hospitals, a representative from your risk management department can explain your coverage and what you should do if a claim is submitted or an event happens.
Know the types of policies available
If you own a practice, you’ll need even more information to make informed decisions about choosing a carrier, negotiating policy options, and allocating premium payments to individual doctors.
A representative from your risk management department can explain your coverage and what you should do if a claim is lodged or an event occurs if you work for a self-insured organization, such as several county and university hospitals.
- Claims-Made Policies
Only occurrences that occurred and were reported while you were insured with that company are covered by claims-made insurance. As a result, both the incident and the claim must occur when the insurance is in effect.
If you cancel a claims-made policy, you will not be covered for any further lawsuits unless you pay for “tail coverage,” which is the phrase for an extended reporting endorsement. Tail coverage is costly—often three times the cost of a yearly premium—but it’s necessary to be covered in case of future claims.
“For an oncologist just coming out of a fellowship and entering a group, it can be a major speed hurdle,” says J. Michael Wormley, MD, chairman of Mutual Protection Trust, a California physicians’ trust (Los Angeles). “The group pays for malpractice insurance, and when a physician leaves, the tail coverage is sometimes unclear. The doctor wishes to leave the group after two or three years. “Who pays the price for the tail?”
Make sure your employment contract specifies who is responsible for tail coverage if you leave the company. See “Employment Contracts: What to Look For” in the November 2006 issue of the Journal of Oncology Practice for more information on negotiating this contract item.
Liability coverage from a claims-made policy that has been dropped may be included in your new insurance policy in some cases. “Nose coverage,” the vernacular name for preceding acts coverage, is an alternative to tail coverage.
If you’re switching insurance companies, get a price for nose coverage from your new company and compare it to the cost of tail coverage from your previous one. Make sure the retroactive date covers the duration of your previous insurance when purchasing tail or nose coverage. Also, make sure the terms of coverage, such as the aggregate limits, are clear. The aggregate limits are the maximum amounts that the insurance will pay for all claims over a specified time period. Annual policies have aggregate limits for one year, however, tail insurance policies can include aggregate limits that apply to all of the years the policy was in existence.
- Occurrence Policies
Regardless of when the claim is made, occurrence coverage offers lifetime coverage for incidents that occurred while the policy was in effect. If you have an occurrence-type policy in place for the calendar year 2007, and a patient files a claim in 2010 for an incident that occurred in 2007, your policy will cover the claim, even if you no longer have insurance with that carrier.
Because the potential for claims rises slowly as policy years accrue, claims-made policies are less expensive than occurrence policies over the first few years of coverage. A claims-made policy’s first-year premium can be as low as 10% to 30% of what’s known as the “mature rate.” The premium then rises every year for three to five years until it reaches the mature rate. When comparing malpractice insurance coverage, make sure to ask how much each one costs.
Does your policy coverage match your practice?
Most insurance has coverage limits of $100,000 to $300,000 and $1 million to $3 million, respectively. The first figure is the maximum amount that the insurance company will pay per claim throughout the policy period, which is typically one year. The second figure is the maximum amount that the firm will pay for all claims during the policy period. If you are the subject of claims or judgments, you will be individually liable for any losses that exceed your insurance policy limits.
Limits are something an oncologist just starting out in practice should look for in a policy, according to Anderson. “You want to have the same constraints as everyone else,” he recommends. “Increasing your limitations may help you sleep better, but it also means you’ll be the big spender in a lawsuit with other defendants. In most cases, you’ll want prevailing boundaries based on your location and specialty.”
Some states, such as California, Florida, and Texas, have restrictions on the number of damages that can be awarded, so you may not need as high of a limit as you would in other jurisdictions. What situations are covered by the policy is also specified. Check to see if your insurance covers all of your clinical activities.
If you’re a practice owner or shareholder, be sure your professional company and staff are covered. Determine if these restrictions apply to everyone or to each individual. If you have a single or small practice, you may want to consider including locum tenens coverage in your policy. Many insurers include this coverage for 30 to 120 days per year at no extra cost.
How are premiums set?
To distribute the risk and establish annual premiums, insurance companies estimate how much money will be needed for claims and divide the total among individuals they insure.
Your premium will be affected by your specialization, geographic region, and personal claims history. The Doctors Company sets rates by assessing losses by specialty, state, area, and trend, according to Anderson. “Each specialty stands on its own, and we don’t expect California doctors to subsidize New York doctors.”
Anderson points out that determining medical malpractice premiums is difficult due to the considerable period it takes for cases to be settled. “Even if you know how many claims were filed in a given year, you won’t know how much they cost until the claims are resolved—which takes an average of 3.5 years.”
What to look for in a carrier?
While premium costs must be considered, other factors such as a company’s financial stability, claims management, and policyholder sensitivity must also be considered. It’s a good idea to speak with a physician who has dealt with the carrier on a claim. Find out how the claim was handled, how involved the physician was in the resolution, and whether he or she was satisfied with the carrier’s treatment of the claim.
Inquire about the carrier’s risk management strategies for physicians and whether there is an emotional support program in place for defendants. Legent’s insurance association, for example, gives subscribers who engage in the carrier’s risk management program a discount. Wormley’s firm requires both physicians and their office managers to attend risk management training, as well as undertaking an onsite risk assessment every three years.
Legant advises doctors to take advantage of any risk management programs given by their medical malpractice insurer.
Your state insurance commissioner’s office may be able to provide information about insurers licensed in your state, as well as information about complaints filed against the insurer.
You should also look into an insurance company’s financial soundness. This isn’t just a theoretical exercise; many insurance firms have failed to weather difficult times and have gone bankrupt.
Legant recommends inquiring about the carrier’s A.M. Best rating. (A.M. Best Company is an independent industry analyst whose carrier ratings are used as a benchmark in the industry.) “The Best rating is a realistic estimate of the company’s solvency,” Legant argues. “Given the current condition of medical negligence, an A-minus is a good score.”
Types of insurance carriers
Insurers vary in how they are organized, who owns or controls them, their financial stability, and whether and how they are regulated by state laws. The most common types of insurance carriers are as follows:
Many people consider whether or not a carrier is owned and operated by doctors to be a vital factor.
More than half of US physicians who buy their insurance are insured by physician-owned organizations. Trusts, captive firms, mutuals, risk-retention groups, and profit-making enterprises are all options.
Insureds benefit from physician-owned companies because they have more control over underwriting and claims decisions. Legant concurs. “My impression is that the ones operated by doctors are more sympathetic to doctors since their objective is to serve doctors and give them a fair shake,” she says. “They would be less willing to compromise solely to save money, for example.”
Wormley, the CEO of a physician-owned trust, explains how disputes are handled in this way: “A peer review committee meets in person with the doctor who is being sued and his counsel.” Wormley emphasizes.
Wormley stresses that although the attorney is being paid by the carrier, he or she is representing the physician. The goal is to determine how defensible the claim is. “We try not to make the decision based on dollars involved—we don’t want to settle if the claim has no merit.”
Who pays for malpractice insurance?
Unless you are going into solo practice, your new employer should be paying for your coverage. Hospital-employed physicians’ premiums are typically paid by the hospital.
Malpractice insurance for doctors
Physicians and other healthcare workers who are required to carry medical malpractice insurance might do so in a variety of methods, each with its own set of consequences.
Medical Malpractice Insurance can be purchased directly by the physician or healthcare provider or given by the employer. We’ll go through some of the advantages and disadvantages of getting coverage via your workplace vs getting coverage on your own.
Typically, an employer who offers coverage has a group-rated medical malpractice insurance policy, which implies that physicians come and go and are scheduled onto the policy. Coverage is supplied by assigning a provider with their own effective and retroactive dates (assuming the policy is claims-made). There are some ramifications to this as tail coverage will typically be offered and in force, as long as the current policy stays in place, or a new policy maintaining the group’s retroactive date is purchased. To properly safeguard oneself against any deviations from the incumbent employer’s coverage, the supplier should look into tail coverage. Tail coverage can be obtained through your current carrier or a new one.
Healthcare professionals should also be aware that coverage provided by an employer does not extend to moonlighting or any other outside endeavors in which the provider may be interested.
When a provider chooses to obtain their insurance, they have additional flexibility as well as the obligation of maintaining their coverage. Providers should look for a brokerage like California Attending Physicians Insurance Agency to conduct a thorough search of the medical malpractice insurance market and manage their policies.
When a policy is in place, the provider is usually able to work at several sites under their specialty-rated policy. They can also transfer carriers at renewal while keeping their retroactive dates (if it’s a claims-made policy) to ensure that previous acts are still covered. The provider is responsible for the tail coverage if he or she decides to stop practicing and requests that the insurance be terminated.
The coin has two sides to it. The provider does not have to worry about maintaining and securing coverage with one, but it does not have the flexibility to work at other practices.
On the other hand, the provider has the flexibility to work in numerous locations, but he or she is also responsible for the policy. Depending on the circumstances, providers may be eligible for two plans to cover exposures while working for an employer and exposures when practicing independently.
Occasionally, your company will provide you the choice of purchasing coverage via them or providing coverage on your own. One thing to consider is whether or not the tail coverage will be available if you acquire the plan via your employer. The expense of leaving that employer is a significant concern. Other choices include purchasing coverage separately, which would make you responsible for the tail coverage if you decide to cancel the insurance. Tail coverage is not required if you prefer to keep your current coverage.
Medical malpractice plans, particularly claims-made policies, can be complicated because they do not cover earlier conduct once the policy has been canceled. You may avoid this by keeping your retroactive date and ensuring that there are no gaps in coverage, or by purchasing tail coverage. Finally, if you decide to purchase coverage on your own, you should be prepared.
Malpractice insurance for nurses
As a nurse, nurse practitioner, or nursing student, you may require professional liability insurance coverage in addition to the coverage offered by your employer. Litigation can happen at any time, whether you’ve just graduated or have been practicing for years, and your employer’s liability insurance is looking out for their interests, not yours. You’ll need a strategy that protects you, your license, your possessions, and your financial future. Defending a claim can cost $64,327 for nurse practitioners (Nurse Practitioner 2012 Liability Update: A Three-part Approach, 2012). The possibilities of being sued for negligence are increasing in these litigious times. Nurses Service Organization (NSO), HPSO’s sister business, has been protecting nurses since 1976. More than 30 national and state nursing organizations support NSO’s malpractice insurance.
Please visit www.NSO.com for professional liability coverage that is tailored to your profession.
Malpractice insurance for medical students
In the United States and around the world, hospitals and clinics require medical students to get medical professional liability insurance (malpractice insurance). The institution providing the training will need students to be covered in the event of a lawsuit, whether they are on a clinical elective, a rotation, or simply observing. AMPI RRG, LLC makes it simple and economical to receive this coverage.
The Academic Medical Professionals Insurance (AMPI) solution
- AMPI offers affordable, short-term coverage – no annual policy required. Purchase coverage only for the time needed.
- Coverage is available to medical students anywhere in the world.
- Simple application process. Apply and pay online.
- Limits of liability up to $1,000,000 / $3,000,000.
- Occurrence policies – no tail premium required.
- Dedicated underwriting designed to provide comprehensive protection tailored for medical education.
- Claim support any time via access to our 24-hour legal hotline.
The Academic Medical Professionals Insurance (AMPI) advantage
Because we specialize in hazards associated with medical education, AMPI understands and responds to the demands of students and teachers. We can provide coverage and medico-legal education services across the academic spectrum as part of the Academic Group, a member-owned medical liability insurance network dedicated to serving the needs of medical educators for over two decades, and through our partnership with Coverys, a leading provider of medical professional liability insurance. We have the expertise and experience to ensure that the coverage you receive is tailored to your specific requirements.
Malpractice insurance for therapists: What You Need to Know
Every day, therapists encounter ethical dilemmas such as when to notify a third party of a potential threat, what level of suspicion justifies a referral to child protective services, and how to deal with clients who are suicidal.
Many of these problems have legal ramifications. If the client suffers specific harm as a result of the therapist’s failure to satisfy the standard of care, the therapist may be held legally accountable. A therapist who fails to effectively treat a credible danger of suicide, for example, maybe sued by a client who is seriously injured in a suicide attempt.
While skilled therapists strive to safeguard their clients and avoid errors in judgment, they are nevertheless human and will make mistakes. If you are sued, malpractice insurance will protect you and your company. Although it is a sort of professional liability insurance, it may not cover all types of litigation.
What malpractice insurance offers
Malpractice coverage offers extensive protection if you are sued. Every policy is different, but in general, you will get:
- Legal help. Your insurer will make sure you are represented by a lawyer who understands malpractice laws in your state. This ensures a zealous defense and increases the likelihood that a frivolous lawsuit will promptly be dismissed.
- Interventions to prevent lawsuits. If a client threatens a lawsuit, your insurer may intervene before the suit is filed. They can send letters on your behalf and begin devising a strategy to protect you and your practice.
- Payment for the cost of lawsuits. You’ll be covered up to the policy limits for any lawsuits that fall within your policy, meaning you don’t have to worry about a settlement or jury verdict bankrupting you or your practice.
The benefits of malpractice insurance include:
- Less time spent worrying about lawsuits. When you have coverage, you know you’re protected if you make a mistake or a client makes an unfair threat.
- The security that comes from having a good lawyer. If you’re sued, it’s hard to know whom to hire. Malpractice insurers select an exceptional lawyer on your behalf.
- Financial security. You won’t have to worry about a lawsuit bankrupting your practice. Lawyers can be expensive and typically charge several hundred dollars an hour. Litigating a malpractice lawsuit typically demands hundreds, or even thousands, of hours of work. Even if you win, you could suffer significant financial losses if you pay for your lawyer yourself.
- Help with licensing board complaints. Many malpractice insurers will also represent you before licensing boards.
Costs of malpractice insurance
The cost of malpractice insurance depends on several factors, including:
- The insurer’s assessment of how high-risk your practice is. If you treat high-risk clients, your premiums may be higher.
- The amount of coverage you seek. Higher policy limits and lower deductibles typically mean higher premiums. If you run a high-risk practice, these higher premiums may be worth it.
- How many years of experience do you have?
- Whether or not you have been sued or faced a licensing board complaint before.
- The state in which you practice. Some states have more favorable legal climates than others.
For a general liability policy that includes malpractice insurance and that has a $1 million claim limit, therapists can expect to pay between $350 to $1,750 in annual premiums. Malpractice-only policies are slightly less.
How to sign up for malpractice insurance
Malpractice insurance is offered by a number of companies. A professional organization, such as the American Psychological Association (APA), or a local organization may be able to help you get discounted coverage. To sign up, it’s usually as easy as filling out a form and providing basic information about your practice.
The most difficult part is determining what kind of coverage you require. Spend some time researching the topics you deal with so you can have a solid notion of your level of risk and the types of lawsuits a business might face. Then compare rates, coverage limitations, deductibles, and other features across different policies to ensure you know exactly what you’re getting.
Avoiding malpractice is the simplest method to deal with it. GoodTherapy features a multitude of resources to help therapists become better advocates for their clients and reduce their malpractice risk.
Professional liability insurance guards against medical errors
Healthcare professionals understand how a single medical mistake or overlook can cause pain, sickness, or even death. If a patient or relative sues, your little practice could be financially crippled.
Malpractice insurance, also known as professional liability insurance for healthcare practitioners, can give your business the peace of mind it needs to continue operating while dealing with a lawsuit.
What coverage can professional liability insurance providers provide for healthcare professionals?
1. Incorrect diagnosis or poor advice
A doctor who makes a mistake or a physical therapist who delivers bad advice could make a patient’s condition worse. If that patient sues you and you don’t have adequate insurance, you may be forced to pay for a legal defense using your own money. Professional liability insurance can help cover costs associated with litigation, such as verdicts and settlements.
2. Accusations of negligence
Nurses, home health aides, and other healthcare personnel are particularly vulnerable to negligence charges. For example, a patient could allege that bedsores were caused by a nurse’s negligence. Professional liability insurance can cover legal costs, such as the cost of employing an attorney, if the patient files a case.
3. Mistakes or oversights
Even if a claim is unfounded, a mistake could result in an expensive malpractice lawsuit. A radiology lab, for example, could be held liable if faulty imaging results in a misdiagnosis. Professional liability insurance can cover legal expenses such as attorney fees and court-ordered judgments.
Other important policies for healthcare professionals
While professional liability insurance protects against mistakes and irresponsibility on the job, it does not offer total coverage. Any healthcare facility faces the danger of accidental injury and property damage on a daily basis. Other policies to think about are:
General liability insurance can cover legal costs associated with patient property damage and injuries, as well as for advertising-related injuries such as slander.
Business owner’s policy: This policy combines general liability and commercial property insurance at a discounted rate compared to buying the policies separately.
Workers’ compensation insurance: Workers’ compensation insurance is required in almost every state for healthcare organizations with employees, and it can cover medical expenditures for work-related accidents.
Cyber liability insurance helps healthcare workers recover from data breaches and cyberattacks by covering recovery fees and other expenses.