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September 26, 2023

A Physician’s Guide to Buying Medical Malpractice Insurance

When your job involves life and death decisions, mistakes are a serious matter. That’s why doctors and their employers are often sued for missed diagnoses, failure to follow up, prescription mix-ups, and other professional errors. To err is human, but physicians can protect themselves by buying medical malpractice insurance.

Medical Malpractice Insurance Requirements

Most doctors purchase medical malpractice insurance coverage. In some cases, coverage is a requirement of state law. In addition, hospitals and other healthcare organizations may require doctors to maintain coverage. Even in the absence of specific requirements, many physicians choose to secure coverage to protect against potential legal costs that could arise from malpractice claims.

However, according to an article published in the Journal of Medicine, some doctors opt to “go bare” – or self-insure their medical liability costs. In other words, they use their own funds to cover their defense costs, as well as any settlements or awards, if they are sued. While this may be possible if your state or employer does not require coverage, it is certainly not advisable, as the damages and legal costs arising from a litigated claim could easily exceed $1 million.

Medical Malpractice Claims Costs and Coverage Amounts

Many states impose caps on damages that victims of medical malpractice can collect. For example, recent legislation in California puts the cap for non-economic damages on a wrongful death case at $500,000. This will increase by $50,000 each year until it reaches $1 million. The cap on a case that does not involve a death is $350,000, increasing by $40,000 each year until it reaches $750,000.

Some states have higher or lower caps than this; some don’t have caps at all. Since caps greatly impact the potential cost of a lawsuit, they have direct implications for the amount of coverage a physician needs and the cost of coverage.

When considering appropriate coverage amounts, it’s also important to take into account the potential for economic damages, such as medical expenses and lost wages – these are not typically included in caps and can be costly. You should also consider the possibility of multiple claims occurring in succession.

Medical Malpractice Premiums

The cost of purchasing medical malpractice insurance depends on several factors, including the physician’s history and specialty, as well as state regulation of medical malpractice claims and whether there are damage caps.

In addition, medical malpractice insurance premiums have been increasing. According to the American Medical Association (AMA), approximately 30% of policies saw premium increases in 2022, with an average increase of 8.1%.

According to STAT, medical malpractice lawsuits were delayed due to the COVID-19 pandemic and have recently been hitting hospitals harder than expected. Social inflation could also be contributing to higher liability costs, according to the Insurance Information Institute. This increases the number of large jury awards, causing legal proceedings to take longer and leading to rollbacks in tort reform.

Understanding What Insurance Does and Does Not Cover

According to the American Board of Professional Liability Attorneys, medical malpractice occurs when three criteria are met: a healthcare professional violates the standard of care, a patient experiences an injury due to the negligence, and the injury suffered results in significant damages.

The Insurance Information Institute says medical malpractice insurance can cover attorney fees, court, arbitration, and settlement costs, punitive and compensatory damages, and medical damages. However, coverage excludes certain types of claims, including those involving sexual misconduct, criminal acts, and inappropriate alteration of medical records.

Occurrence-Made Basis vs. Claims-Made Basis

Medical malpractice insurance can operate on an occurrence-made or claims-made basis. Knowing what type of coverage you have will help you avoid costly coverage gaps.

Occurrence-made policies cover claims if the event in question occurred when the policy was in force, including if the policy is no longer in force. In contrast, claims-made policies only cover claims that are made while the policy is in force.

To understand why this matters, consider a doctor who retires and lets his coverage lapse. A former patient then files a medical malpractice lawsuit. A claims-made policy would not cover this claim. Having said that, it is often possible to buy “tail” coverage, which extends the coverage period to give physicians coverage in scenarios like this.

Buying Medical Malpractice Insurance

Whether you’re a resident just out of medical school or a doctor with decades of experience, a single mistake or missed diagnosis could result in a lawsuit. In fact, AMA says nearly one in three U.S. physicians report having been sued. Surgeons are even more likely to face medical malpractice claims.

Want to explore your insurance options? Heffernan Insurance Brokers provides affordable and customized medical malpractice insurance plans. Learn more.

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