The bad news, however, is that the few cases that make it to the finish line receive an average jury award of $799,000(2). Adding to the worries of physicians practicing in the U.S., in recent years the number of verdicts with settlements climbing over $10 million has spiked.
Clearly, as a physician or any other health professional, you cannot afford to shoulder this level of risk alone. That’s why it’s essential to understand medical malpractice insurance, also known as medical professional liability (MPL) insurance. MPL insurance covers expenses related to defending against malpractice suits and settling them. That includes legal fees, costs for expert witnesses and if you lose a case, the assessed punitive, compensatory and medical damages up to your coverage limit.
Here is what you need to know to navigate through your insurance options and find the right product to protect your assets.
A Tale of Two Insurance Types
There are basically two types of MPL insurance —based upon occurrence or claims made. What’s the difference?
- Occurrence-based is for incidents that happen during your policy’s term. Let’s say you had an occurrence-based MPL policy for 2018 that for some reason lapsed at the end of the year. If a patient sued you in January 2019 for a healthcare event that occurred in March 2018, your 2018 policy would accept that claim. This type of coverage carries a higher premium due to the extended time frame for liability.
- Claims-based is for claims that occur and are reported during the policy term.
- Tail and Nose Coverage – Claims-based MPL is more common than occurrence-based insurance, which gives rise to the need for tail and nose coverage. It protects doctors in transition. When changing employers or shifting to your own practice, you cannot assume your new insurance will take care of any malpractice issues that arise from work at your prior employer.Both tail and nose coverage protects you for incidents that occurred during the previous claims-based insurance term that are not reported until you are under a new policy. The only difference between tail and nose coverage is the company from which you buy it. You purchase tail insurance from your prior carrier and nose insurance from your new one. There’s no need to buy both tail and nose coverage.
- Coverage Ceilings – Your insurance will likely have a coverage limit, the amount your insurer will pay if you lose a lawsuit on top of the litigation costs. It’s often around $1 million for each occurrence with a maximum of $3 million a year per doctor. Often the minimum limits required are established by your state insurance department.
- Expect Exclusions – MPL insurance does not absolve you of all risk and assumes a level of professional responsibility. You should expect exclusions for any issue that occurs under the influence of alcohol or drugs, sexual misconduct, dishonesty, illegal disclosure of patients’ private medical records and more. Check your policy to make sure you’re comfortable with the exclusions.
- The Varying Cost of Medical Malpractice Insurance – The cost for medical malpractice insurance varies substantially due to the different levels of risk that doctors face depending on the region where they work and their specialty. Because their average annual per-capital medical malpractice costs are significantly more than in other states, New York has the costliest rates(3). Anesthesiologists, surgeons and obstetricians/gynecologists, who have the most significant risk of being sued, pay the highest rates among the different specialties(4). For instance, obstetricians/gynecologists in New York can spend over $200,000 a year whereas internal medicine doctors in the same region pay around $34,000 on average.(5)If you’re shopping for medical malpractice insurance, decide whether you’re comfortable with an occurrence-based or claims-based policy, taking the costs into account. If you choose claim-based, investigate whether you need tail or nose coverage. Explore the coverage ceilings and any exclusions. Then, get a quote that factors in your risk exposure based on your specialty and location.
[1] Cision PRWeb, Medical Liability Monitor’s 2018 Annual Rate Survey Indicates Medical Professional Liability Insurance Could be Turning Away From Stability
[2] American Association for Physician Leadership, The Verdict Is In: Surviving a Medical Malpractice Trial
[3] True Cost of Health-Care, Medical Malpractice: Myths and Realities
[4] Chron, How Much Do Doctors Pay for Insurance?
[5] American Medical Association, Medical Professional Liability Insurance Premiums: An Overview of the Market from 2008 to 2017
