Medical malpractice insurance is a specialized type of professional liability insurance. Medical malpractice insurance protects physicians against claims that a patient suffered injury or death due to mistakes or omissions in their care. It’s important to get malpractice insurance as the average payout cost for a successful malpractice suit is over $350,000. This amount is high enough to deplete a doctor’s life savings. Additionally, most states and medical systems require doctors to have medical malpractice insurance to practice.
While large organizations may have their own trust fund to cover possible claims, smaller practices and individual physicians use external insurers for a coverage plan. Even larger organizations can leave gaps in coverage, creating a need for additional third-party insurance. When it comes to insurance, these are the main types of malpractice coverage:
Claims-made policies are the most common type of malpractice insurance coverage. A claims-made policy covers claims that are filed while you hold your policy and addresses events that occurred during your policy. For example, if you had a claims-made malpractice policy from 2000-2005, it wouldn’t cover a claim filed in 2006 for an event that happened in 2005.
Claims-made policies have cheaper premiums than other types of malpractice insurance, although rates rise yearly. Additional coverage, such as nose and tail coverage, may need to be added to a claims-made policy, increasing the cost.
Nose coverage is a supplement to claims-made malpractice plans. It protects against claims arising from events that happened under a previous, terminated policy, but weren’t filed until the current policy.
When a physician switches claims-made policies to a new insurance carrier, they may want to purchase nose coverage from the new carrier. This protects them from any claims about procedures which occurred while the physician was insured by their past carrier, ensuring there aren't any liability gaps.
Tail coverage is another supplement to claims-made policies. Tail coverage covers incidents that happened when a claims-made policy was in effect, but weren’t filed as claims until after the policy ended.
Tail coverage makes claims-made policies look like occurrence-made policies. Physicians will generally purchase tail coverage if switching to a new practice or retiring.
Occurrence policies cover claims for events that took place during the period of coverage, even if the claim is filed after the policy ends. Basically, an occurrence policy works like a claims-made policy with a tail. These policies, because they cover more, also tend to have higher premiums.
Claims-paid policies only protect physicians if they are insured by that policy at the time when a case is settled and the payout decided. Otherwise, it won’t be covered. This means that claims-paid policies can force physicians to remain with a policy for years while a case is being negotiated just to ensure that they will be covered.
Claims-paid policies are much rarer than claims-made or occurrence policies. They are only offered by a few insurers in a few select states. While cheaper than claims-made policies, they are also more restrictive.
A claims-paid policy forces physicians to either keep their policy going until the date of the payout or terminate the claims-paid policy and risk having to pay the claim themselves. Thus, while claims-paid policies can be cheaper, they are more demanding and can make it difficult to switch insurers.
In addition to medical malpractice insurance, some hospitals and practices may want to purchase errors and omissions insurance, often called E&O insurance. Errors and omissions (E&O) insurance is a blanket term for professional liability insurance, covering claims where a professional made a mistake (error) in servicing a client or failed to service a client in some way (omission). Medical malpractice is a type of E&O insurance, but it is often not enough to cover a medical group.
E&O covers suits brought against the practice or hospital itself, its officers, medical directors, employees, and volunteers.
E&O insurance can protect against claims arising from things like
For example, if a staff member accidentally failed to exercise the appropriate amount of care when handling confidential patient data, E&O insurance could protect against the resulting lawsuit. E&O insurance helps secure the organization against an unforeseen, miscellaneous claim.