Every doctor needs trusting patients, experience, knowledge, and, of course, a medical degree. On top of these, doctors need medical malpractice insurance to back up all those other elements. So, how does medical malpractice insurance work, and why do you need it?

Before we get into the details, it’s important to recognize that medical professionals are human beings and are prone to making mistakes in their high-pressure and high-stakes careers. You may still get sued despite your best efforts to render high-quality care.



Sometimes, you get to prove your innocence after costly litigation, sometimes you lose despite your innocence, and sometimes you’re held accountable for a mistake. All of these scenarios can lead to financial ruin without proper insurance coverage.

How does medical malpractice insurance work? Let’s start by defining it.

Image showing medical professionals

What Is Medical Malpractice Insurance?

Simply put, medical malpractice insurance covers healthcare professionals sued for negligence or alleged wrongdoing while providing medical care to their patients. It helps you pay for legal fees, settlements, or judgments if you either admit to or are found liable for medical malpractice.

The main purpose of medical malpractice insurance is to protect the financial assets of healthcare professionals and provide them with peace of mind, knowing that they have support in case something goes wrong. It also ensures that patients can receive compensation for any harm caused by a medical professional’s negligence.

In case of frivolous lawsuits, medical malpractice insurance investigates and deposes the plaintiff’s witnesses. It can also provide a defense lawyer to represent you in court, especially when you don’t consent to a settlement.

Relevance to Dentists, Physicians, Optometrists, and other Healthcare Professionals

For whom is malpractice liability insurance meant? It’s essential for all healthcare professionals, including dentists, physicians, and optometrists. These professionals are responsible for the health and well-being of their patients and are at risk of facing medical lawsuits if something goes wrong.

For example, dentists can be sued for issues like improper treatment, misdiagnosis, or failure to diagnose a condition that leads to harm or injury to a patient.

Similarly, physicians may be sued for medical errors, such as procedural mistakes.

Optometrists may also face medical malpractice claims for misdiagnosing eye conditions or causing harm during an eye exam.

All healthcare professionals need to have proper medical malpractice insurance to cover their finances and reputation in case of any legal action.

How Does Medical Malpractice Insurance Work?

Though different types of medical malpractice insurance policies may vary in their coverage, the general process of how it works is relatively straightforward.

Application and Underwriting

The first step in obtaining medical malpractice insurance is to fill out an application and undergo underwriting. The insurance company will review your application, evaluate your risk level, and determine the premium cost for your policy based on factors such as your specialty, location, experience, and claims history.

The underwriting for professionals is different from that of practices or groups, so always go for the right type of coverage for your specific needs.

The policy you purchase will outline the coverage limits and any exclusions or conditions that may apply.

Coverage Limits

  • Per Occurrence Limit: Declares the maximum amount your insurance company will pay for a single claim.
  • Aggregate Limit: Asserts the top financial cost your insurer incurs for all claims against you during your coverage.

It’s essential to carefully consider these limits when choosing your coverage, as they can significantly impact how much protection you have in case of multiple lawsuits or a high-cost claim.

Your limits will depend on your specialty, location, and claims history, among other factors. Generally, higher-risk specialties like surgery will likely have higher limits than those of lower-risk specialties like primary care.

Determining Premiums

Premiums for medical malpractice insurance policies are typically based on the risk associated with a specific specialty. Generally, high-risk specialties that are more likely to be sued attract higher premiums than lower-risk specialties.

Other factors affecting premiums include location, claims history, and coverage limits. For example, a physician practicing in an area with high medical malpractice claim rates may have a higher premium than one practicing with low claims.

A young doctor with little experience is also likely to pay higher premiums than an established physician with a record of successful practice.

Location and the size of your practice can also affect premiums, as larger practices with more patients may have a higher risk for malpractice claims.

Moreover, some counties, cities, and states have higher malpractice insurance rates than others due to factors such as legal climate and competition among insurers.

Here are some tips for lowering your expenses on medical malpractice insurance.

How Medical Malpractice Insurance Handles Claims

Reporting a Claim

The process for handling claims can vary depending on the insurer and policy. Some insurers may require physicians to report any incidents or potential claims as soon as they become aware of them, while others may only require reporting when a formal lawsuit is filed.

We always advise notifying your insurer immediately after an incident occurs, even if you do not believe it will lead to a lawsuit. Your insurer will be better positioned to mitigate the issue before there’s reputational damage.

Investigation by the Insurance Company

Insurance companies run and thrive on many principles. One of them is acting in good faith. They’re also under legal obligation and shareholder interests to conduct the utmost due diligence in tackling all claims from clients and the public.

Therefore, your insurer will first want to verify the validity of your claim before proceeding to defense arrangements or settlement negotiations. They need to get to the bottom of the matter and establish if:

  • You made an honest mistake.
  • You intentionally neglected a patient or acted criminally.
  • You were coerced into undertaking unethical practices by your employer or colleagues.
  • You are suffering a frivolous lawsuit from an unsatisfied or malicious client.

The investigation process may also involve reviewing your medical records, obtaining witness statements, and consulting with experts to determine the extent of liability.

Rejection

You pay for coverage from professional liability by paying premiums and other charges your insurer imposes on your policy. Therefore, your insurer is obligated to review and approve your claim as long as it meets the terms of your contract.

However, your insurer may reject your claim. For example, insurers will reject a claim if they find that you acted criminally or with gross negligence. They may also reject your claim if they determine you failed to act within your profession’s acceptable standard of care.

In such cases, review and understand the reasons for rejection. Your insurer should provide a detailed explanation and references to any clauses in your policy that justify their decision.

If you disagree with their decision, you can seek legal advice or engage in an appeals process provided by your insurer.

Settlements

If your insurer finds you’re likely liable for the incident, they may recommend settling the issue instead of going through a lengthy court process. With your consent, the insurance adjuster will negotiate a settlement amount with the affected party.

Early settlements with NDA clauses will save you time and money while protecting your reputation. However, it is essential to carefully review the settlement terms and consult with legal counsel before signing anything.

Always reserve the right to refuse to settle with a plaintiff if you feel you did not breach the standard of care or are not at fault. Sometimes, it’s better to battle it out in court and clear your reputation.

Legal Defense in Liability Trials

If the injured party decides to take legal action against you, your insurer will defend you in court. This coverage is called “insurance defense” and kicks in when a plaintiff sues for damages covered by your policy.

Your insurance provider will hire an attorney on your behalf and cover their fees, court costs, and other expenses related to the case. In some cases, insurers may require you to pay a portion of these costs as part of your deductible or co-payment.

Remember, insurance defense does not guarantee success. The outcome of the trial depends on several factors, such as evidence presented, witness testimonies, and the judge or jury’s decision.

Paying for Damages Awarded

If the court finds you liable for damages, your insurance policy will cover the amount up to your policy limit. Depending on the nature of the incident, the liability could include:

  • Medical expenses.
  • Property damage.
  • Lost wages.
  • Pain and suffering.

In some cases, the court may also require you to pay punitive damages to punish you for reckless or intentional actions. Most insurers don’t cover punitive damages, but some offer it for an additional cost.

Representation at Licensing Board Hearings

If a patient files a complaint or malpractice claim against you, it may also trigger an investigation by your licensing board. In such cases, your insurer may provide legal representation to defend your professional license and reputation.

It’s important to note that insurance defense for licensing board hearings is not guaranteed and depends on various factors, including the policy coverage and severity of the allegations.

The Different Types of Medical Malpractice Insurance

Let’s review three distinctive coverage types: claims-made, occurrence, and tail coverage. Each type offers different levels of protection and has its distinguishing pros and cons.

Claims-Made Coverage

This policy type is the most common and typically the most affordable choice for healthcare providers. It provides coverage only for claims filed while the policy is active. Once you cancel or switch to a different policy, any claims filed after that will not be covered.

Occurrence Coverage

This policy covers you for incidents arising during the specified employment or practice period, regardless of when plaintiffs file a claim.

This policy type offers long-term protection, even if you change insurers or stop practicing medicine.

That said, occurrence policies tend to be more expensive than claims-made policies because they cover a longer time frame.

Tail Coverage

Tail coverage is an optional add-on that extends your coverage beyond the standard policy period. If you switch from a claims-made policy to an occurrence policy, or if you retire or leave the medical field altogether, tail coverage ensures that you’re still protected against any claims related to past incidents.

We always advise tail coverage for continuous protection, as claims can arise years after the incident occurred.

Insurance Companies and Agencies That Pay

It’s crucial to use companies and agencies offering medical malpractice insurance that always live up to their expectations. The insurance industry is vast and competitive, with insurers varying in cost, coverage, and reputation.

Always choose tried-and-tested carriers like Med Pro through our reputable agency. At Professional Insurance Plans, we cover over 3000 healthcare professionals nationally.

With a 90% trial win rate and 80% of claims closed without payment, you can trust your reputation is safe with us. Need more reasons? Go over these tips for medical practitioners when choosing malpractice insurance.

Posted in Health Insurance, Insurance