Medical Malpractice Insurance Coverage Basics

Here's what both sides of a medical malpractice case need to know about the role of insurance coverage.

Insurance coverage plays a vital role in any medical malpractice case. If you've been injured as a patient, you'll almost certainly be dealing with the health care professional's insurer (or an attorney hired by the insurer). And if you're a doctor or other care provider, you need to make sure you have proper insurance coverage in case you end up facing a lawsuit. Read on for the details on how medical malpractice insurance works.

Claims-Made Versus Occurrence-Made Policies

The two most common types of medical malpractice insurance policies are claims-made and occurrence-made policies.

A claims-made policy will protect the insured as long as it was the policy in effect:

  • when the alleged malpractice took place, and
  • when the claim was first reported.

For example, assume a doctor is insured from January 1, 2000 until the policy expires on December 31, 2010. If the alleged malpractice took place on September 1, 2010, and was claimed by November 1, 2010, then the doctor is covered -- both dates fell within the policy period. However, if the event took place on September 1, 2010, but the claim isn’t made until January 1, 2011, then there is no coverage. In cases like this, it is important to know whether the doctor purchased tail or nose coverage. Tail coverage will protect a doctor in claims that are based on treatment provided while the policy was in effect, even when the claim itself is filed after the policy was cancelled or expired. Nose coverage protects doctors for acts that occurred before the insurance policy took effect.

Note that some claims-made policies require that the claim be filed in court during the policy period; others only require that the incident first be reported within the policy period.

An occurrence-made policy will cover the doctor for events that happened when the policy was in effect, regardless of when they are first claimed. So, in the example above, the occurrence-made policy will provide coverage even if the malpractice is first claimed on January 1, 2011, and even if the doctor is purchased a new insurance policy (or has no insurance policy in place at all).

Coverage Limits

There are two types of coverage limits. A per-occurrence coverage limit is the total amount an insurance company will pay for a single claim. An aggregate limit is the total amount the insurance company will pay for a period of time. For example, a $1,000,000 per-occurrence limit with a $3,000,000 aggregate yearly coverage limit means that the most the insurance company will pay on any one claim is $1,000,000, and, the most the company will pay in one year is $3,000,000 total for all claims made against the care provider.

Certain medical specialties (for example, obstetrics) are associated with extremely high medical malpractice verdicts. Likewise, certain cities and states (for example, New York, NY), are associated with a high number of malpractice lawsuits. A health care professional's medical specialty and practice location may be a factor in how much coverage they carry.

Keep in mind that if the coverage limit is too low, and no umbrella protection is in place, a verdict against the doctor could mean they are personally on the financial hook for any amount that exceeds the coverage limits. That's bad news for the doctor or other care provider, but it's also potentially bad news for the injured patient. It's one thing to collect a judgment when an insurance company is writing the check. Trying to recover against a doctor can be a challenge.

Find out whether the coverage limit includes attorney’s fees and court costs. If it does, it will reduce the amount that can be paid for a settlement or verdict.

Finally, look into whether two or more “occurrences” that are factually related will be considered a “single claim” governed by a single coverage limit.

Malpractice Insurance: More Factors to Consider

  • Group Coverage: A group policy usually covers all employees at a care facility, or a sub-set of employees. Some employees, such as Physicians’ Assistants and Nurse Practitioners, may need to pay an additional premium for individual coverage under a group policy.
  • Personal Coverage: A health care professional may carry personal coverage even if they are covered by a group or hospital's policy. Whether this additional protection is necessary can depend on many factors, such as whether the group coverage limit is adequate or whether the individual practices medicine outside the group.
  • Exclusions: Not every act is covered by medical malpractice insurance policies. If a doctor makes a misrepresentation on the policy application, it can void the policy altogether. Also, illegal acts and sexual misconduct are usually not covered.

Learn more about Common Errors by Doctors and Hospitals.

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