Medical Liability Insurance

Medical malpractice insurance is crucial for your professional peace of mind

Introduction
Medical liability insurance is also known as professional liability, medical malpractice and errors and omissions insurance. Medical liability insurance defends you against claims that arise out of your treatment of patients and pays any judgments ordered by the courts up to the limit stated in your policy, except for criminal or intentional acts.

Medical liability is not mandatory in all states; however, growing your practice may depend on having errors and omissions insurance, which is required by hospitals, medical groups and other professional facilities and services.

Policy types
Almost all medical liability insurance is written on a “claims made” basis. Claims made means that the treatment that leads to the claim and the reporting of the claim both must take place during the policy term. Occurrence form, which is harder to obtain than “claims made,” is more liberal with the claims reporting period. The treatment has to take place during the policy term, but claims can be filed after the policy has expired.  Professional liability insurance policies can be issued to individuals, medical corporations, medical groups, hospitals, locum tenens registries and many other kinds of professional groups.

Structured premium
Years can go by between the date you treated a patient and the day you learn about any allegations of malpractice. This lag between the treatment and the claim generally means fewer claims during the first couple years of your policy, so “claims made” errors and omissions insurance premiums increase annually until they level off, or “mature,” at five to seven years.  Your premium also depends on your medical specialty and where you practice.

Tail coverage
When your claims-made policy expires, lapses or is non-renewed, you’ll have the option of purchasing “tail coverage.” Tail coverage extends the time you have to report claims based on any treatment that took place during the original policy term.  Tail coverage can cost as much as 200 percent of your medical malpractice insurance premium, depending on your specialty. Some insurance companies offer free tail coverage to doctors who are retiring or become disabled. Read your tail coverage quote carefully; some offer a limited claims reporting term of two to five years and some are unlimited.

Prior acts coverage
If you purchase another doctor’s practice, you may have an errors and omissions exposure lingering from his or her patients, whether or not they decide to become your patients. Depending on how the purchase was structured, you may be able to buy prior acts insurance to cover the risk you assume from the predecessor practice.  You may not be able to get prior acts coverage if you bought less than half of the practice’s assets.

Doctor-owned insurance companies
Medical liability insurance goes through periods of instability when prices rise sharply and availability becomes limited. To help stabilize the errors and omissions marketplace, groups of doctors have started their own insurance companies. Insurance companies owned by policyholders are called mutual insurance companies. Mutuals, such as The Doctors Company, pay dividends to the policyholders when claims are low and the companies are profitable. They also are perceived as being aggressive with claims and risk management, thereby keeping claims cost under control. One of the downsides is that thin claims reserves and inexperienced management can make them vulnerable to financial setbacks, causing a rise in premiums.
 
Tips & Warnings
Check into the claims reserves and the history of the insurance company, especially if it is relatively new. Investigate offers of errors and omissions insurance carefully before making a deposit on a new policy.

Before hiring a locum tenens, find out what you need to do to report him or her to your professional liability insurer. Most companies charge a flat premium to add the doctor to your insurance policy for a specified number of days. If the locum tenens is coming from a registry, you may have coverage under the registry’s professional liability policy. Seek your insurance agents’s advice on the best way to protect your interests.