You may treat thousands of patients in your career. Not all of them will receive the outcome they want.
The actions of medical professionals have a far greater impact than those of other professions. They can impact a person's health — even their life. This is especially true in the event of a physician’s honest mistake or act of negligence.
Mistakes and negative outcomes can also have a detrimental financial impact on patients — and their treating physicians. When the worst happens, patients and their families often sue. As great as the odds of being sued is for medical professionals, you need medical malpractice insurance.
This guide will walk you through everything doctors need to know about medical malpractice insurance.
According to 2016 study by the New England Journal of Medicine, about 75 percent of physicians will be sued for medical malpractice in their careers. Roughly 20 percent will have to pay an indemnity because of a judgement against them.
Medical malpractice insurance protects doctors from liability resulting from a patient's injury or death. Also known as professional liability insurance, medical malpractice insurance can alleviate the financial burden of real or perceived errors or negligence in treatment.
Medical malpractice insurance typically covers allegations of negligence from the acts, errors and omissions of physicians and healthcare providers. Examples include, but are not limited to:
- Misdiagnosis or delayed diagnosis
- Childbirth-related injuries
- Errors in prescribing medication
- Errors in administering anesthesia
- Other surgery-related errors
The costs of these incidents that malpractice insurance typically covers include:
- Judgements awarded to a suing patient by a judge or jury
- Cost of arbitration
- Costs of settling a case before trial
- Medical damages
- Punitive and compensatory damages
- Attorney fees
- Court costs and fines
Medical professional liability insurance is a must-have for anybody who practices medicine or treats patients. This includes:
- Physician assistants
- Nurse practitioners
- Physical therapists
In addition, all medical facilities should have coverage. Both the facility’s legal entity and employees who treat patients should be covered. Physicians with independent practices should have insurance on employees and themselves.
Malpractice insurance is a requirement for practicing medicine in the following states:
- New Jersey
- Rhode Island
Another seven states require a minimum amount of coverage to participate in state programs that assist them with claims:
- New Mexico
- New York
If your state of license doesn’t require coverage, chances are your employer will. Hospitals where you have privileges will also likely require minimum amount of coverage.
A survey by the American Medical Association (AMA) showed more than one-third of respondents had been sued at least once. Nearly 17 percent had been sued at least twice.
Your risks increase based on your specialty. The AMA reported the following rates of being sued by speciality:
- 63 percent of OBGYNs and general surgeons who responded to the survey
- 52 percent of emergency medical professionals
- 47 percent of surgical sub-specialities
- 38 percent of radiologists
- 36 percent of anesthesiologists
- 33 percent of family practice physicians
- 32 percent of internal medicine specialists
- 25.5 percent of internal medicine sub-specialists
- 18 percent of pediatricians
- 16 percent of psychiatrists
Regardless of whether you’re at fault, a malpractice suit can be costly.
According to the AMA, plaintiffs filing malpractice cases rarely prevail. In fact, 68 percent of malpractice cases filed in 2015 were dropped, dismissed or withdrawn. Only 7 percent were decided by trial verdict. Of those, the medical professional being sued won 88 percent of cases.
Of cases that never got to trial or decision, physicians still shelled out for defense costs. The total, on average, was $30,000.
If you settle out of court or lose a jury verdict, the impact can be irreparable without malpractice insurance.
One study found the average payout for successful malpractice claims between 2009 and 2014 was $353,000. Of more than 280,000 paid claims during the same period, about 8 percent topped $1 million. Nearly one-third of those involved a patient death.
The cost of medical malpractice insurance has stabilized in the last few years. Yet it is still among a medical professional’s highest expenses.
An AMA research report titled “Medical Professional Liability Insurance Premiums: An Overview of the Market from 2008 to 2017,” indicates that rates have remained largely unchanged for the past 10 years.
Using data from its Annual Rate Survey, the AMA report showed that 74.2 percent of premium categories were the same in 2017 as in the previous year. Another 12.4 percent of categories had decreasing rates year over year.
Yet, the AMA concluded that “despite the increasing stability in liability premiums, the prospects for the near future are less than certain…The medical liability market bears close monitoring to see whether stability in premiums will continue.”
The report shows average premium rates for three medical specialties in seven regions. Specialty and location are the variables that most determine insurance cost.
The reason your speciality is of major concern to an insurer is because certain ones carry more risk of adverse events and potential lawsuits. This typically leads to higher judgements and legal bills.
In addition to the higher risk, some specialists need higher limits of liability coverage. Therefore specialties that fall into a riskier category will require higher premium rates. Those specialists include:
- Emergency room physicians
- Cardiovascular surgeons
- General surgeons
- Orthopedic surgeons
- Plastic surgeons
The AMA report shows that obstetricians can expect to pay around $150,000 in annual premiums for malpractice insurance. If your specialty requires fewer actual procedures, you can likely get by in the neighborhood of $30,000 to $50,000.
Some low-risk specialties in low-risk areas of the country will pay less than $10,000 a year for coverage.
Your location factors into your malpractice rates for two reasons: your state’s tort laws and the incidence rate of malpractice suits.
States that have favorable laws will enable insurers to charge less for malpractice insurance. Among the laws deemed most favorable are:
- Hard caps on non-economic damages (i.e. “pain and suffering”)
- Case certification mandates that require plaintiffs to obtain a signed statement from a qualified expert prior to litigation
- Pre-litigation review panel process
According to the AMA research, an internal medical professional practicing in the Los Angeles, California area paid an average of $8,274 in annual malpractice insurance premiums in 2017. The same specialty practicing in Philadelphia shelled out $25,000 for coverage. In Miami-Dade, Florida, the annual bill was $47,700.
The full list of premium rates in the AMA report are as follows:
- Los Angeles-Orange County, California: $49,804
- Connecticut: $170,389
- Miami-Dade, Florida: $190,829
- Cook-Madison-St. Clair, Illinois: $177,441
- New Jersey: $90,749
- Nassau-Suffolk, New York: $214,999
- Philadelphia, Pennsylvania: $119,466\
- Los Angeles-Orange County, California: $41,775
- Connecticut: $65,803
- Miami-Dade, Florida: $190,829
- Cook-Madison-St. Clair, Illinois: $118,909
- New Jersey: $60,810
- Nassau-Suffolk, New York: $134,923
- Philadelphia, Pennsylvania: $85,930
- Los Angeles-Orange County, California: $8,274
- Connecticut: $34,700
- Miami-Dade, Florida: $47,707
- Cook-Madison-St. Clair, Illinois: $40,865
- New Jersey: $15,900
- Nassau-Suffolk, New York: $33,852
- Philadelphia, Pennsylvania: $24,433
In addition to specialty and location, other factors that will determine your malpractice premium rates include:
The policy’s liability limits. Medical malpractice insurance policies will limit the amount of liability they will cover in a year. A typical policy will set a cap of $1 million per occurrence and $3 million in total liability claims in a year.
Keep in mind those limits are often geared toward high-risk specialists. If your speciality has less risk of malpractice and/or you practice in an area with a lower degree of higher-dollar judgements, you can probably get by with less coverage.
Your claims history. As with other types of insurance, malpractice insurers will note your claims history. If you have had medically related lawsuits brought against you, whether they were dismissed, settled, or paid out as a judgement, you can expect to pay higher premiums than a similar doctor with no claims history.
Insurers often offer discounts for new physicians given their lack of claims history. You can also earn discounts if you go a certain period without claims and for being board certified.
Rates may increase each year until a maturity date.
You treat a patient. Complications arise. Three years later, the patient sues for malpractice.
Even after a lawsuit is made, the case can last for years. In fact, 39 percent of malpractice lawsuits last one to two years. Of those, 10 percent took more than five years to adjudicate.
A lot can change in those years. You may be working at a different hospital or clinic. Perhaps you started your own practice. It’s possible you have different malpractice coverage today than you had when the incident occurred.
Does your old policy cover the claim? Or will your current one? Does it matter if you reported the complications when they happened?
The answers to these questions depend on the type of coverage you had then or have now.
Malpractice insurance typically comes in one of two forms:
- Occurrence coverage
- Claims-made coverage
Knowing if a policy offers occurrence or claims-made coverage is the most important factor when evaluating medical malpractice insurance. This helps you determine when a policy covers an incident. This is especially important when you change insurance coverage.
An occurrence policy will pay a claim based on when a potential malpractice incident occurred. This is true even if you no longer carry the coverage when a suit or complaint is filed. Your coverage begins as soon as your policy is in force. It will cover you for any claims made against you during the policy term.
For example, say you paid premium on an occurrence policy between 2010 and 2015, then cancelled the coverage. A former patient charges you today with malpractice for treatment received in 2014. The occurrence policy you had should protect you from the claim.
The maximum coverage amount for an occurrence policy is based on what the policy stated in the year the incident occurred. For example, say you had a maximum benefit amount of $500,000 in 2010. An incident occurred in 2010. Even if the claim is filed today, the policy would only reimburse you up to that $500,000 limit.
Occurrence coverage is the preferred type of malpractice insurance for most medical professionals. However, it's not available in all states.
One of the risks of an occurrence policy is the carrier going out of business long after you purchase the policy. If that happens, you may not have coverage if a former patient files a claim, even if the incident occurred during the period when the policy was in effect.
Occurrence malpractice coverage will typically cost more than a similar claims-made policy, and the difference can be significant.
Premiums for occurrence coverage generally remain constant for the life of the policy unless the insured changes specialties or rating category.
A claims-made policy only provides coverage for the period when premiums are paid. You must be covered by the policy both at the time of an incident and at the time a claim of malpractice is made.
In the hypothetical example above — when a former patient charges you today with malpractice for treatment received in 2014 — a claims-made policy would not cover any losses. Since you were not paying insurance premiums at the time of the claim, you would no longer be covered.
For claims-made policies, premium amounts will start low and then increase for about five years before remaining level. This is because of the elapsed time that occurs between an incident and the filing of a claim. Even if you’re unfortunate enough to have an adverse incident on the first day your policy is in effect, it will likely be a few years before the insurer would have to pay a claim.
In general, during the first year of malpractice coverage, you can expect to pay 60 percent to 70 percent less in premium with a claims-made policy than a similar occurrence policy. In the second year, you would save roughly 30 to 35 percent. Third-year premiums might be about 10 percent to 15 percent less for a claims made policy. By the fourth and fifth years, the premiums for both types of policies are about equal. After that, the premium amount for a claims-made policy may be slightly higher than for an occurrence policy.
Claims-made coverage is more readily available and some carriers only offer this option.
A third, less-common type of coverage is claims-paid malpractice insurance. This type of coverage is less expensive than the two main types. But it is also more restrictive.
On a claims-paid policy, the insurer only covers you if you are still insured at the time the claim is paid. It does not matter when the incident occurred. Nor does it matter when the patient made the claim of malpractice.
Premiums for claims-paid policies are typically based on claims settled during the previous year or claims anticipated to be settled over the next year.
Tail and nose coverage
What happens if your claims-made policy lapses or you switch insurers, then have a patient file suit? You would be liable for damages. But there are two ways to obtain coverage for incidents that occurred in the past.
- Purchase an Extended Reporting Endorsement on your current claims-made policy. This is often referred to as a “tail.”
- Purchase prior acts coverage from your new insurer. This is referred to as “nose” coverage.
Tail coverage on a claims-made policy enables you to report claims in the future. This is true even after the policy period has ended. It basically converts the policy into an occurrence policy. If you purchase tail coverage on a policy that is lapsing or that you are replacing, any future claims on incidents that occurred while the policy was in effect will be covered.
Tail coverage generally stays in effect for an unlimited period. The coverage limits you had on the original policy will also remain in effect, unless you choose to carry lower liability limits.
The one-time cost of tail coverage is generally 1.5 times to 2.5 times what you paid in annual premium for the original policy. The amount will depend in large part on the period of time it will cover. In other words, how long the previous claims-made policy was in effect.
Keep in mind that tail coverage may not provide all of the same benefits as your regular malpractice policy. For example, your tail policy may no longer carry a consent-to-settle provision. This means the insurance company has to obtain your written permission before they can settle a claim.
Tail policies also include legal and attorney fees inside the liability limits, instead of paying them outside liability coverage. This means legal fees count toward the liability limits on your policy, leaving less money available to pay toward the actual judgement.
Carriers sometimes offer free tail coverage to retiring physicians who have been continuously covered by the same policy for a certain period of time.
Tail coverage is important in the event you later become employed by a hospital or health system and receive their group coverage. That’s because many hospital systems are self-insured. As such, they typically won’t cover prior acts for incoming physicians.
Another common situation in which a doctor needs tail coverage is when one moves to another state. Often, a new policy issued in one state, whether individually or through a group policy, won’t cover prior acts from another state. This would necessitate tail coverage from the previous carrier.
Like other aspects of malpractice insurance, tail coverage can be complicated. You should consult with an agent who has experience in this type of insurance coverage to review all of your options.
Nose coverage enables you to be covered for incidents that occurred prior to the policy’s effective date. As long as you pay premiums, the policy will pay for malpractice claims that occurred before obtaining the policy, within certain limits.
In general, it’s more affordable to purchase prior acts coverage from your new carrier than to get tail coverage from your former insurer. About the only reason to obtain tail coverage is if a claims-made policy is cancelled or terminated and you cannot secure prior acts coverage from your new carrier.
The bottom line is that you need malpractice coverage for all past, present and future procedures you were part of and patients you treated. Not only does this potentially protect you financially, having any gaps in coverage can also affect your medical licensing and in some cases, employment.
Medical professional liability insurance is a must-have for anybody who practices medicine or is involved in treating patients. But it’s not enough just to have a policy.
According to a 2016 study by the New England Journal of Medicine, about 75 percent of physicians will be sued for medical malpractice at some point in their careers.
Therefore, it’s important to evaluate a prospective malpractice insurer and the policy being offered to ensure it will provide adequate coverage if and when you need it.
Here are nine factors you should consider when evaluating coverage options:
Is there a consent-to-settle provision?
Insurers prefer to settle some cases to avoid a large payout. Settlement amounts are usually a fraction of what a court judgement may have required. Settlements also reduce the amount of legal expenses required to defend against a malpractice complaint.
But settlements aren’t always a positive for physicians. They mean admitting some level of guilt or negligence. Even if you did everything you could, you would have to admit otherwise.
If your malpractice insurer settles with a plaintiff, the resulting settlement will remain on your record. This can damage your reputation. It can affect your licensure status. I can potentially impact future employment opportunities. A settlement can also affect your insurability in the future.
That’s why it’s important to ensure that your malpractice insurance policy contains a consent-to-settle clause.
With a consent-to-settle provision, the insurance company has to obtain your written permission before they can settle with a complaining patient. If you don’t consent, the insurance company cannot settle. They must allow the complaint to go through the legal process. The insurance company may strongly try to persuade you to settle, but the final say would belong to you.
Without this provision, you have absolutely no control over whether the malpractice carrier settles a given claim.
Does the policy limit your consent-to-settle?
Even with a consent-to-settle provision, insurance companies often try to limit their liability. This can be done in a few ways.
The most common is a “hammer” clause. If your policy contains this clause and you refuse to settle, the insurer’s liability will be limited.
The amount the insurer will have to pay depends on the type of hammer clause. Some will cap the amount they are required to pay in cases where they wanted to settle, even if that amount is less than the policy’s coverage limit. The policy’s hammer clause might also stipulate that the insurance company is liable for a percentage of any judgment above the recommended settlement.
Another type of hammer clause dictates the insurer will not owe more than the amount they agreed to pay in the settlement. For example, say the insurer recommends a $100,000 settlement. The claim results in a $200,000 judgement. Under this type of hammer clause, the insurer would only have to pay $100,000. You would be responsible for the other $100,000 because of your refusal to settle.
Another common clause is an arbitration clause. This provision enables the insurance company to hire an arbiter if they believe the physician is unreasonably withholding consent to settle a claim. The arbitrator will hear both sides and determine if the physician has grounds to fight a claim or if a settlement is the better option. If the arbitrator sides with the insurer, the company can proceed with settling the case even without the doctor’s consent.
If possible, obtain a pure consent clause. This means the consent-to-settle provision contains no hammer clause, arbitration clause or other clause that limits your non-consent ability. Essentially, you can reject the insurer’s offer to settle without further ramifications. Even if you lose at trial, the insurance company would be required to pay the full amount of the verdict and legal fees as stipulated in the policy contract.
Keep in mind that your employer may have consent in group malpractice policies. This is another reason why physicians should be covered by their own individual malpractice insurance policy.
If you are covered by an employer policy, you may not have the consent-to-settle. Instead, as the owner of the policy, the hospital may be the party that gets to consent to a settlement.
Does it include cyber liability?
Today, physicians don’t just have to worry about treating patients. They also have to protect the valuable data of those patients. Health care data is among the most sought after by hackers and data thieves. Suffering a data breach can leave a clinic or facility on the hook for compensating patients and other costs.
Many malpractice insurance policies now contain endorsements for cyber liability. Depending on the policy, cyber liability may cover data breaches, denial of service attacks, identity theft and virus attacks. Some policies will also cover regulatory penalties, notification and public relations expenses, credit monitoring for affected patients, and data recovery costs.
Given how common and how costly cyber attacks on health care facilities are, your policy should include cyber liability coverage. You may also need supplemental coverage to provide adequate protection.
Does it include tail coverage?
Because of the chances of switching insurance policies in the future, the policy you buy today should offer tail coverage.
Tail coverage on a claims made policy enables you to report claims in the future even after that policy period has ended. It basically converts the policy into an occurrence policy. Therefore if you purchase tail coverage on a policy that is lapsing or that you are replacing, any future claims on incidents that occurred while the policy was in effect will be covered.
Tail coverage generally stays in effect for an unlimited period. The coverage limits you had on the original policy will also remain in effect, unless you choose to carry lower limits of liability on the tail policy.
Does it have incident reporting?
The claims process can be triggered in one of two ways.
One is an incident report. This enables a physician to report a potential incident to his or her malpractice insurer as soon as it occurs. Being able to report an incident prior to a suit being filed offers you more malpractice protection.
By reporting incidents to the insurance company before a patient’s claim is made, physicians can ensure they are covered by a lawsuit filed later. This is true even if they have a claims-made policy. Once an incident is reported by a physician, the insurance company essentially becomes responsible for any claim that may arise from it. This is true even if the policy is cancelled before a complaint is filed.
The other trigger is written demand. This means the malpractice carrier is not responsible for covering an incident unless and until a patient takes action. That action can include filing a lawsuit, demanding compensation, or enlisting an attorney to investigate. So if the policy was claims-made coverage and it lapsed or was replaced before a patient took action, the insurer would not be liable for damages.
How are defense costs handled?
Some policies will include your legal and attorney fees within your liability coverage limits, while others will not.
For example, a typical policy may have a $1 million liability limit per occurrence. If you incur $100,000 in legal costs to defend against an incident, a policy that pays those costs “inside” your liability limits will only pay a maximum of $900,000 toward a judgement. Basically, the $100,000 in legal costs count toward the $1 million limit.
But the same policy that pays defense costs “outside” liability coverage still leaves the full $1 million toward a judgement. Attorney expenses do not count toward the liability coverage limit in an “outside” policy.
What is excluded from coverage?
All malpractice policies contain exclusions. This is language added to the policy stating that the insurer will not cover losses resulting from certain activities. You should review the policy to ensure that certain procedures you may perform are not excluded. In addition, duties performed as a medical director or consultant may be excluded from coverage as well.
What are the liability limits?
Medical malpractice insurance policies will limit the amount of liability they will cover in a year. A typical policy will set a cap of $1 million per occurrence and $3 million in total liability claims in a year.
Therefore, if you have one lawsuit in a year and were ordered to pay $1.5 million in damages, your policy would cover $1 million. You would be liable for the other $500,000.
But if you have three lawsuits in a year and each one results in $500,000 in damages, the insurance company would pay the full $1.5 million. That’s because none of the three exceeded the $1 million per occurrence limit. Plus, the total of all three is below the $3 million aggregate.
The $1 million and $3 million limits are often geared toward certain specialists, including those:
- With a higher incidence of malpractice claims
- Who are sued for and often win higher-than-average judgement amounts
- Who practice in areas prone to medical malpractice lawsuits
Examples include emergency room physicians, OB-GYNs and neurosurgeons.
If your specialty has less risk of malpractice and/or you practice in an area with a lower degree of higher-dollar judgements, you can probably get by with less coverage.
What is the insurer’s financial strength?
One of the most important factors when choosing a carrier is its financial strength and stability. After all, if you’re required to pay a judgement of, say, $1 million, you need your insurance company to be able to write that check.
Nothing in the insurance business is 100 percent guaranteed. However, you are more likely to collect on your benefits if you purchase insurance from a company with superior financial ratings and a lengthy history.
Rating agencies assess an insurer’s ability to meet its current and future obligations to policyholders. These ratings are based on independent investigation of an insurer’s financial health. Once they’ve fully evaluated an insurer, the agencies assign a letter grade. Just like in medical school, higher letter grades indicate better performance — in this case, financial performance.
When choosing a malpractice insurance provider, limit your search to companies that are rated at least an A- by A.M. Best, the most prominent rating agency for insurers.
Below are examples of malpractice insurers rated at least an A- by A.M. Best:
- The Doctors Company
- Medical Protective
- NORCAL Mutual
- MAGMutual Insurance Company
- MLMIC Insurance Company
- ProAssurance Indemnity Co.
- ProAssurance Casualty Co.
- ISMIE Mutual Insurance Co.
- State Volunteer Mutual
- Princeton Insurance Co.
- Mutual Insurance Company of Arizona
In addition to financial ratings, you should also examine the insurer’s:
Surplus. This is the company’s net worth. It is calculated by subtracting liabilities from assets. An insurer’s surplus determines its ability to assume risk and pay for unanticipated deficiencies in loss reserves.
Net written premium. This is the sum of premiums maintained by the company after it has paid for reinsurance. It’s essentially a measure of how much of the company’s paid premium it gets to keep. When reviewing net written premium, don’t be as concerned about the amount. To gauge the insurer’s financial health, look at changes from year to year. Increases mean the company is writing more policies. Decreases can indicate one of several issues.
Loss reserve. This is an estimate of an insurer’s liability from potential future claims.
The application process for malpractice insurance requires completion of an application form and supporting documents. Many providers provide a choice of paper and online forms.
Application questions and requirements will vary by company. The application will likely cover:
- Coverage and claims history
- Your education
- Specialty and types of procedures performed
- Practice details, including the location and hours worked
- Hospital privileges
Supporting documents you may need to provide include:
- A copy of the Declarations page from your most recent malpractice policy. This is usually the first page of the policy. It contains the insurance company, your name and address, policy number and other pertinent policy information.
- If applicable, you will also need proof of tail coverage you have purchased.
- Current Curriculum Vitae (CV)
- A copy of your letterhead
- If you’re applying for corporate or group coverage, you will also need to supply business documents.
It’s important to answer all application questions completely and accurately. Any omissions or errors can delay the application process. Misrepresentations can jeopardize your coverage.
In many cases, your employer may provide you with access to the insurance company they use.
If you require coverage on your own, you can purchase malpractice insurance directly from an insurance company. Another options is through an agent or broker who is contracted with a single carrier (a captive agent) or multiple insurers (independent agents).
As with other types of insurance, it is usually better to work with an independent agent who can offer policies from multiple carriers.
Captive agents typically only represent one insurance company. Therefore, they can only offer one option, which may not be the right policy for you.
On the other hand, independent agents represent multiple carriers. Having more options means the agent can often find you the best deal on insurance.
When choosing an independent agent:
Do your own research first. If you have a general idea of what malpractice insurance will cost, you’ll be more equipped to recognize if the agent is over-selling you a policy. There are multiple websites that provide free quotes. You can also ask colleagues what they pay for coverage.
Ask for a referral. Instead of trying to find an agent on your own, ask a colleague or trusted advisor to recommend an insurance professional. A fellow doctor who had a positive experience with their agent should be happy to recommend them to you.
Check out the agent’s background. Conduct an Internet search for the agent soliciting your business. Look for any red flags such as consumer complaints or regulatory actions. You can also check with your local Better Business Bureau. And you can check your state’s insurance commissioner to ensure the agent is licensed and whether they have run afoul of regulators.
Companies that offer medical malpractice insurance typically specialize in coverage for the medical profession. Your options will typically fall into one of the following categories:
Admitted carriers. This is the most common type of malpractice insurer. A company that is an admitted carrier is regulated by state insurance departments. This means that rates and policies are approved by the states in which insurers sell policies. Admitted carriers are also backed by a state guarantee fund in the event they become insolvent and cannot meet their obligations to policyholders.
Excess and surplus lines. These are non-admitted carriers, which means their policies are not regulated by states.
Joint underwriting association (JUA). This is a nonprofit association established by a state legislature when affordable coverage is unavailable. Many states have JUAs to provide medical malpractice insurance to physicians who cannot obtain coverage in the commercial marketplace.
Mutual insurance company. This is an insurance company owned by policyholders. Company profits are typically paid out as dividends to policyholders. Sometimes they are used to reduce policy premiums.
Physician-owned carriers. There are several malpractice insurance companies owned by physician networks. The Doctors Company is the nation’s largest physician-owned medical malpractice insurer, with 80,000 members and over $4 billion in assets.
Reciprocal insurance company. This is an unincorporated association of subscribing members that agree to pool risks. Similar to a mutual insurer, a reciprocal insurer is owned by policyholders. Profits are used as dividends or to reduce premiums. This type of company is managed by an attorney-in-fact who reports to a board of directors.
Risk retention groups. These are similar to mutual insurance companies, in that they are owned by policyholders. In this case, the owners are physicians covered by malpractice insurance. They are allowed by the Federal Risk Retention Act (RRA) of 1986. The RRA allows organizations and persons involved in similar businesses and activities to form their own liability insurance company.
Risk purchasing groups. This type of insurer is also available under the RRA. What differs from a retention group is that a purchasing group buys insurance coverage from an insurance company rather than forming their own insurance company.
Trusts. A trust is an alternative to traditional insurance. They provide coverage to members, who make contributions to join the trust arrangement. Depending on the state, trusts may not be regulated by state insurance departments or covered by the state’s guaranty funds.
It’s important to understand the malpractice laws in the state(s) in which you practice. They help determine how much and the types of coverage you need. Below is a state-by-state overview, based on information from nolo.com:
Alabama does not have caps on malpractice damages. The state also does not limit attorney fees. It does not have a Patient Compensation Fund (PCF).
Alabama has a two-year statute of limitations on malpractice claims from the day an incident occurred. It can be extended if cause of action could not be reasonably discovered within two years. In that case, the plaintiff has six months from the date of discovery to file suit.
Alabama is one of the few states with a “contributory negligence” rule. This means if a patient is found to be at all negligent with respect to an injury, illness, or medical condition, they are completely barred from recovering any damages.
Alaska has a $250,000 cap on non-economics damages. That cap is raised to $400,000 for cases involving wrongful death or severe permanent physical impairment that is over 70 percent debilitating.
The statute of limitations for malpractice is two years. Alaska does not cap attorney fees. It does not have a Patient Compensation Fund (PCF).
Alaska has a "pure comparative negligence" rule. This means that a plaintiff’s malpractice award can be reduced by the amount of fault they had in the incident. If, for example, a patient was awarded $100,000 but was found to be 20 percent at fault, the patient would only receive $80,000.
Arizona does not have caps on malpractice damages. It also does not have a Patient Compensation Fund (PCF). The statute of limitations for malpractice is two years. The state does limit the fees attorneys may charge clients who file a medical malpractice claim. Arizona has a "pure comparative negligence" rule with respect to liability (see Alaska for a full definition).
Arkansas does not have caps on malpractice damages. It also does not have a Patient Compensation Fund (PCF). The state also does not cap attorney fees for malpractice plaintiffs. The statute of limitations for malpractice is two years, though there are several instances where that can be extended.
Arkansas has a “modified comparative negligence” rule. It’s similar to the pure comparative negligence rule with one exception. If the jury finds the patient’s fault equal to or greater than the physician’s fault, the patient is not entitled to recover any damages.
California places a $250,000 cap on non-economic damages. There is no cap on economic damages. There is no Patient Compensation Fund (PCF) in the state. There are caps on the fees attorneys may charge clients who file a medical malpractice claim.
A medical malpractice lawsuit must be filed within three years of injury or one year after discovery of the injury.
California has a "pure comparative negligence" rule with respect to liability (see Alaska for a full definition).
Colorado malpractice laws have a $1 million umbrella cap on total compensation, which includes economic and non-economic. A plaintiff can exceed that cap if there is justifiable cause to do so. There is also a separate $300,000 cap on non-economic damages.
Colorado does not have a Patient Compensation Fund (PCF). The state also does not cap attorney fees for malpractice plaintiffs.
The statute of limitations for malpractice is two years. Colorado has a “modified comparative negligence” rule (see Arkansas for a full definition).
Connecticut does not cap malpractice damages. The state does, however, limit attorney fees. It does not have a Patient Compensation Fund (PCF). The statute of limitations for malpractice is two years, though there are several instances where that can be extended. Connecticut has a “modified comparative negligence” rule (see Arkansas for a full definition).
Delaware does not have caps on malpractice damages. The state does, however, limit attorney fees. It does not have a Patient Compensation Fund (PCF).
In Delaware, a patient must file a malpractice lawsuit within two years of the incident. If the injury could not be discovered within two years, the statute of limitations is extended one year.
Florida is one of three states that have damage caps written in their statutes, but have had them deemed unconstitutional by their state Supreme Court.
The state limits attorney fees. It does not have a Patient Compensation Fund (PCF).
In Florida, a patient must file a lawsuit within two years of discovering the injury or, at the latest, four years from when the malpractice occurred.
Georgia is one of three states that have damage caps written in their statutes, but have had them deemed unconstitutional by their state Supreme Court. There is no Patient Compensation Fund (PCF) in the state. There are also no caps on the fees attorneys may charge clients who file a medical malpractice claim.
The statute of limitations for malpractice is two years. There are several instances where that can be extended.
Hawaii law imposes a $375,000 cap on non-economic damages. The state does not place a cap on economic malpractice awards. There is no Patient Compensation Fund (PCF) in the state. There are no caps on the fees attorneys may charge clients who file a medical malpractice claim.
In Hawaii, a patient must start a medical malpractice lawsuit within two years of discovering the injury or, at the latest, six years from when it occurred.
Idaho law puts a $250,000 cap on non-economic damages in personal injury cases. There is no Patient Compensation Fund (PCF) in the state. There are no caps on the fees attorneys may charge clients who file a medical malpractice claim. The statute of limitations for malpractice is two years.
Illinois is one of three states that have damage caps written in their statutes, but have had them deemed unconstitutional by their state Supreme Court. There is no Patient Compensation Fund (PCF) in the state. There are caps on the fees attorneys may charge clients who file a medical malpractice claim.
In Illinois, a patient has two years from the time of awareness to file a medical malpractice lawsuit. The absolute deadline is four years from the date of the malpractice incident.
In Indiana, the cap on malpractice awards is determined by when the incident occurred. Between June 30, 1999, and July 1, 2017, the cap is $1.25 million on total damages. An individual provider cannot be held liable for more than $250,000 in damages. After July 1, 2017, the malpractice cap is set at $1.65 million. Provider liability is set at $400,000. After June 30, 2019, the malpractice cap will be raised to $1.8 million and provider liability capped at $500,00.
The state’s PCF pays malpractice amounts over $250,000, but not more than $1 million.
Iowa does not cap or limit malpractice damages. It also does not have a Patient Compensation Fund (PCF). The state does limit the fees attorneys may charge clients who file a medical malpractice claim. The statute of limitations on malpractice is two years.
In Iowa, a doctor or other health care provider is only responsible for their proportionate share of any judgment if a plaintiff is less than 50 percent responsible. Joint and several liability is still in effect, but for economic damages only.
Kansas applies a cap on non-economic damages only. The cap is between $250,000 to $325,000 depending on when the incident occurred. The cap will rise to $350,000 in 2022. The state’s PCF pays any amounts exceeding the insurance coverage of a medical provider. The statute of limitations in Kansas is two years from the date of injury, or two years from the date on which the injury should have been reasonably discovered.
Kentucky does not have caps on malpractice damages. It also does not have a Patient Compensation Fund (PCF). The state also does not cap attorney fees for malpractice plaintiffs.
A medical malpractice case must be filed within one year of when the injury was discovered. The state does have a five-year limit from the date an incident occurred. But the state’s courts have said this rule is unconstitutional.
Kentucky operates under a pure comparative fault system. This means that a percentage of fault can be assigned to each party in a case. The verdict is apportioned based on those percentages. Any fault attributed to the plaintiff reduces his or her malpractice award.
Louisiana limits total damages in malpractice cases to $500,000. The cost of future medical care is not subject to the cap. The state’s PCF covers amounts over $100,000. The statute of limitations is one year. The state does not limit the fees attorneys may charge clients who file a medical malpractice claim.
In Maine, there are no laws that specifically limit awards in malpractice cases. However, there is a cap of $500,000 on damages related to allegations of wrongful death. This law could be applied to scenarios involving medical negligence.
Maine does not have a Patient Compensation Fund (PCF). The state does cap attorney fees for malpractice plaintiffs. The standard filing deadline for malpractice in Maine is three years. Maine has a “modified comparative negligence” rule (see Arkansas for a full definition).
Maryland has a cap on non-economic damages. The current cap is $800,000 and is scheduled to increase $15,000 each year. There is no cap for economic damages.
Maryland’s statute of limitations for medical malpractice cases is five years of the time that the injury was committed, or three years of when the injury was discovered, whichever comes first.
Maryland has a “contributory negligence” rule (see Alabama for a full definition).
Massachusetts caps non-economic damages at $500,000 in medical malpractice cases. There are several exceptions that enable plaintiffs to exceed that cap. The state does not have a Patient Compensation Fund (PCF). It does cap attorney fees for malpractice plaintiffs.
The statute of limitations for malpractice is three years, though there are several instances where that can be extended. Massachusetts has a “modified comparative negligence” rule (see Arkansas for a full definition).
In Michigan, caps for non-economic damages range from $445,500 to $795,500, depending on severity. The state does not have a Patient Compensation Fund (PCF). It does cap attorney fees for malpractice plaintiffs. The statute of limitations for malpractice is two years.
As long as the plaintiff bears no fault in a malpractice case, liable defendants are on the hook for the entire verdict jointly and severally. This means the plaintiff may seek to collect the entire verdict from one or all of the parties. If the plaintiff is apportioned some percentage of fault, the defendants are liable only for their percentage.
There are no damage caps, no limits on attorney fees and no PCF in Minnesota. The statute of limitation deadline falls four years "from the date the cause of action accrued" in most cases.
In most personal injury claims in Minnesota, parties who share fault are considered to share joint and several liability. This means any one of them may have to pay the damages for all of them, if the others cannot pay.
Mississippi's cap for non-economic damages is set at $500,000. There are no limits on attorney fees and no PCF in the state.
Patients have two years from the discovery of an injury to file a malpractice claim. They have up to seven years total from the actual act that caused the injury. If malpractice leads to death, a wrongful death claim must be filed within three years of the date of death.
The state of Missouri has a $400,000 cap on non-economic damages. The cap is $700,000 in medical malpractice cases involving "catastrophic personal injury" or wrongful death. There are no limits on attorney fees and no PCF in the state. The statute of limitations for malpractice is two years, though there are several instances where that can be extended.
Montana's cap for non-economic damages in medical malpractice cases is set at $250,000. There are no limits on attorney fees and no PCF in the state. Patients have two years from the date of discovery to file a malpractice suit, or five years from the date of the actual incident.
Nebraska has established a cap on total damages from malpractice, which includes economic and non-economic damages. The current cap is $2.25 million for incidents that occurred after 2014. Lower caps are available for incidents that occurred on or before December 31, 2014. Its PCF covers amounts over $500,000 up to a cap of $1.75 million per claim.
A plaintiff has one year from the date an injury was discovered or two years from when it actually occurred to file a malpractice suit.
Nevada has established a cap on non-economic damages at $350,000. The state does not have a Patient Compensation Fund (PCF). It does cap attorney fees for malpractice plaintiffs. The statute of limitations for malpractice in Nevada is three years.
New Hampshire does not have caps on malpractice damages. The state does limit attorney fees. It does not have a Patient Compensation Fund (PCF). The statute of limitations for malpractice in New Hampshire is three years. The state has a “modified comparative negligence” rule (see Arkansas for a full definition).
The state of New Jersey does not have a cap on compensatory damages for medical malpractice, which includes both economic and non-economic damages. Its cap applies only to punitive damages, which are rare in malpractice cases. That cap is set at $350,000, or five times the amount of compensatory damages, whichever is greater.
The state does limit attorney fees. It does not have a Patient Compensation Fund (PCF). The statute of limitations for malpractice is two years, though there are several instances where that can be extended. The state has a “modified comparative negligence” rule (see Arkansas for a full definition).
New Mexico has a cap of $600,000 on many types of damages available to a medical malpractice plaintiff. But the cap specifically excludes compensation for "medical care and related benefits.” The state has a PCF that limits a physician’s liability to $600,000. The state does cap attorney fees for malpractice plaintiffs. The statute of limitations for malpractice is three years.
The state of New York has no damage caps and no Patient Compensation Fund (PCF). Plaintiff’s attorneys fees are capped.
In New York, a lawsuit for medical malpractice must be started within 30 months of the alleged malpractice. If malpractice occurred as part of ongoing treatments, the 30-month clock begins when treatment is completed. New York has a "pure comparative negligence" rule with respect to liability (see Alaska for a full definition).
In North Carolina, state law capped non-economic damages at $500,000 in medical malpractice cases. Beginning in 2014, the cap was adjusted for inflation every year. The cap in North Carolina does not apply when a patient suffers “certain kinds of disfiguring or permanent injury AND the defendant's malpractice arose from recklessness, malice, an intentional act, or gross negligence.”
There is no PCF and no caps on attorney fees. North Carolina’s statute of limitations is three years after death or injury, or one year after injury is discovered.
In North Dakota, there is a $500,000 cap on non-economic damages in medical malpractice cases. There is no Patient Compensation Fund (PCF) and no limits on what attorneys can charge to represent plaintiffs. The statute of limitations is two years.
Under Ohio law, non-economic damages in a medical malpractice case can’t exceed the greater of $250,000 or three times the plaintiff's economic damages -- with an overall maximum of $350,000 per plaintiff or $500,000 for each case (if there is more than one plaintiff). The cap can increase to $500,000 per plaintiff or $1 million per case if the malpractice caused certain permanent and/or catastrophic injuries.
There is a one-year statute of limitations based on discovery of an injury. The limit is four years based on when the actual incident occurred.
In Oklahoma, non-economic damages are capped at $350,000. Exceptions to the cap include cases of wrongful death involving gross negligence, fraudulent intent or malice. There is no Patient Compensation Fund (PCF). There are limits on what attorneys can charge to represent plaintiffs. The statute of limitations for malpractice is two years.
Oregon has a $500,000 cap on non-economic damages. The cap only applies to wrongful death cases. There is no Patient Compensation Fund (PCF). There are limits on what attorneys can charge to represent plaintiffs.
The state requires medical malpractice claims be filed within two years of the date the injury occurs or the date it should have been discovered. If an injury results in wrongful death, any lawsuit must be filed within three years of the date of injury, the date of discovery, or the date of death, but no more than five years from the date the injury occurred.
Oregon has a “modified comparative negligence” rule (see Arkansas for a full definition). The state also has joint liability rules when more than one defendant is found to have committed medical negligence.
Pennsylvania law is similar to New Jersey in that there is no cap on economic and non-economic damages. Only punitive damages are capped in medical malpractice cases.
The malpractice statute of limitations is two years after the patient reasonably should have known an injury has occurred and the doctor’s conduct that caused it. It is also two years from the date of death if the malpractice claim is wrongful death. There is also a seven-year limit from the date the injury occurred, unless it involves a foreign object left inside the body.
Pennsylvania has a PCF that covers any claims beyond $500,000 against doctors.
There are no damage caps, no limits on attorney fees and no PCF in Rhode Island. The statute of limitations is three years in the state. Rhode Island has a "pure comparative negligence" rule with respect to liability (see Alaska for a full definition).
South Carolina has placed a $350,000 cap on non-economic damages. If there is more than one defendant, the non-economic damage cap on all parties involved is $1.05 million. The state’s PCF will pay any awards over $100,000 per claim or $300,000 annually for participating medical professionals.
In South Dakota, non-economic damages in medical malpractice cases are capped at $500,000. There are no limits on attorney fees and no PCF in the state. The state has a two-year statute of limitations. It uses a "pure comparative negligence" rule with respect to liability (see Alaska for a full definition).
In Tennessee, non-economic damages are capped at $750,000 per claim. The limit is $1 million for catastrophic injuries. There is no PCF in the state. Attorney fees are limited by state law. Medical malpractice claims must be filed within one year of the date the injury is discovered, but not more than three years after it occurred. An exception exists for injuries involving a foreign object left inside a patient's body during a procedure.
Texas has a cap of $250,000 on non-economic damages. If there is more than one defendant, total non-economic damages assessed to all parties can be no greater than $500,000. There are no limits on attorney fees and no PCF in the state. Texas has a two-year statute of limitations.
Utah's cap on non-economic damages is $450,000. There is no PCF in Utah. State law does limit attorneys fees for plaintiffs in malpractice cases.
The medical malpractice statute of limitations in Utah is two years from the date an injury was or should have been discovered. The maximum limit is four years from incident occurrence.
The state uses a modified form of comparative negligence when figuring out fault in medical malpractice cases. Utah provides that a claimant’s negligence can prevent them from being awarded damages if their percentage of fault exceeds the combined fault of the defendants.
There are no damage caps, no limits on attorney fees and no PCF in Vermont. The statute of limitations for malpractice is three years, though there are several instances where that can be extended. Vermont has a “modified comparative negligence” rule (see Arkansas for a full definition).
Virginia caps all damages on malpractice cases, whether economic or non-economic. The cap gradually increases based on when an incident occurs. The cap currently ranges from $2.1 million to $2.25 and will continue to increase each year. The statute of limitations is two years in Virginia.
Virginia is a contributory negligence state. This means a plaintiff who contributed to his or her own injury may not be able to recover damages.
The state of Washington has no damage caps and no Patient Compensation Fund (PCF). Plaintiff’s attorneys fees are capped. The state’s statute of limitations is three years.
Washington is a "pure comparative negligence" state (see Alaska for a full definition). The state also follows joint and several liability rules. As long as the plaintiff has no fault, he or she may collect damages from any of the defendants, regardless of their percentage of fault.
West Virginia puts a $250,000 cap on non-economic damages in medical malpractice cases. This cap increases to $500,000 for non-economic damages if the medical malpractice resulted in certain catastrophic damages. There is no Patient Compensation Fund (PCF) in the state. West Virginia does not limit attorney fees.
There is a two-year statute of limitations in West Virginia. There is joint and several liability in the state. It also uses a modified comparative negligence system (see Arkansas for a full definition).
Wisconsin has a $750,000 cap on non-economic damages in medical malpractice cases. Health care providers must have medical malpractice coverage of $3 million, including a limit of $1 million per claim. Claims above this amount are paid by the PCF.
There is a three-year statute of limitations in Wisconsin. State law also says that defendants must be at least 51 percent at fault to be jointly and severally liable for a verdict.
There are no damage caps, no limits on attorney fees and no PCF in Wyoming. There is a two-year statute of limitations. In the state, a defendant is only responsible for their proportionate share of damages if the plaintiff is less than 50 percent responsible.
Below are definitions of terms you may encounter as you research your medical malpractice insurance options:
- Adjudication. Legal process of settling a dispute or determining an issue in court.
- Admitted carrier. A company regulated by state insurance departments. This means that rates and policies are approved by the states in which insurers sell policies. Admitted carriers are also backed by a state guarantee fund in the event they become insolvent and cannot meet their obligations to policyholders.
- Annual aggregate limit. This is the maximum amount an insurance company will pay for all claims that occurred and were reported during a given policy year.
- Arbitration. The use of an impartial third party to settle a dispute. Arbitration requires that 1.) both parties agree to an arbitrator; and 2.) they agree to abide by the arbitrator’s decision.
- Cancellation. This is when a policy is terminated before its expiration. Either the insured or the insurer can cancel a policy. The insurance company must provide 30 days notice of cancellation.
- Claims-made policy. A claims-made policy only provides coverage for the period when premiums are paid. You must be covered by the policy both at the time of an incident and at the time a claim of malpractice is made.
- Claims-paid policy. On a claims-paid policy, the insurer only covers you if you are still insured at the time the claim is paid. It does not matter when the incident occurred. Nor does it matter when the patient made the claim of malpractice.
- Claims reserves. This is money the insurance company has set aside to meet future payments for claims incurred but not settled.
- Consent-to-settle. If your malpractice policy has this provision, the insurance company has to obtain your written permission before they can settle with a complaining patient. Without it, you have absolutely no control over whether the malpractice carrier settles a given claim.
- Coverage trigger. This is an event that activates malpractice coverage. A claim is typically triggered by a claim of malpractice by a patient. In some cases, a physician can report an incident, which would serve as the coverage trigger.
- Declarations page. This is the part of the policy that contains basic information. It includes the insurance company, the insured, the policy number, term period, the premium amount, and any deductibles to the policy. This is usually the first page of the policy.
- Deductible. This is the amount an insurer deducts from a loss prior to paying the claim. There are several types of deductibles on malpractice policies. Voluntary deductibles enable the policyholder to agree to pay a preliminary amount of a claim payment. The higher the deductible, the lower the premium. An involuntary deductible is assessed by an insurance company if they find adverse risks associated with the policyholder. Deductibles can also be split between the policyholder and the insurance company.
- Domiciled. This denotes a state that an insurance company is regulated and licensed to operate in.
- Economic damages. Money to compensate a victim for monetary losses. This may include medical expenses and lost wages.
- Endorsement. This is a form that modifies or adds to the provisions in an insurance policy. A common endorsement on malpractice insurance is providing tail coverage.
- Exclusion. All malpractice policies contain exclusions. This is language added to the policy stating that the insurer will not cover losses resulting from certain activities. Common exclusions are illegal conduct, sexual misconduct, inappropriate alteration of medical records, non-routine procedures, and incidents that occur while performing administrative duties.
- Exemplary damages. These are also known as punitive damages. They are designed to punish defendants for malicious conduct. They are rare in malpractice cases and may not be covered by malpractice insurance.
- Hammer clause. This is often added to a consent-to-settle provision. If your policy contains this clause and you refuse to settle, the insurer’s liability will be limited to the amount recommended in their settlement offer.
- Indemnity. Malpractice insurance is a type of indemnity insurance. Indemnity means making up for a loss suffered by a victim. Indemnity insurance is a contractual agreement in which one party guarantees compensation for damages sustained by another party.
- Joint and several liability. Many states limit damages that a defendant can be held liable for based on how much they were found to be at fault. This is known as joint liability. For example, if a physician is found to be only 25 percent responsible for a plaintiff’s injuries, he or she may only be required to pay up to 25 percent of damages. In other states, multiple defendants may be considered responsible for all damages. This is known as several liability. That means if a single physician was only 25 percent at fault, he or she could be forced to pay more than 25 percent of damages.
- Limits of liability. This is the maximum amount an insurance company will pay on a claim. There are typically limits per incident, as well as aggregate limits over a year.
- Locum tenens. This describes a physician temporarily working in place of a regular doctor. This may be due to vacation, illness or other reason. It’s important to know if and by whom you have malpractice coverage while working as a locum tenens physician.
- Noneconomic damages. This is compensation awarded in malpractice claims that are not based on monetary losses. These are often referred to as “pain and suffering” or “emotional distress.” Many states cap how much plaintiffs can be awarded in noneconomic damages.
- Occurrence policy. An occurrence policy will pay a claim based on when a potential malpractice incident occurred. This is true even if you no longer carry the coverage when a suit or complaint is filed.
- Patient Compensation Fund (PCF). Several states limit the liability of medical professionals in malpractice cases by establishing PCFs. These funds are administered by the state. They are used to compensate patients who receive malpractice awards beyond a certain amount. They are funded by surcharges assessed on health care providers.
- Policy term. The length of time for which an insurance policy is written.
- Prior acts. This type of malpractice coverage will cover incidents that occurred before your policy went into effect. This is also commonly known as nose coverage. If you sign up for a new policy and don’t have tail coverage from your previous insurer, you should have prior acts coverage from your new policy.
- Reinsurance. This is an agreement in which an insurance company insures the risk of another insurance company. Often, smaller insurance companies use reinsurance because they can only cover a small portion of their liability limit.
- Risk classification. Malpractice insurers group physicians based on the amount of risk they pose and the potential amount of losses. Your risk classification will be based on your specialty, your experience, location, and past malpractice claims.
- State Guaranty Fund. Each state maintains a fund that protects policyholders if an insurance company cannot meet its financial obligations. If you have a malpractice claim and your insurance company can’t pay all or part of it, the state guaranty fund may cover some or all of the loss.
- Statute of limitations. This is the time period a potential plaintiff has to file suit in malpractice case. If state law has a two-year statute of limitations, that means a patient must file suit within two years of when an incident occurred. Once the statute expires, a patient cannot sue for malpractice. Statutes vary by state, but two years is typical.
- Underwriting. This is the process an insurer undergoes to assess your malpractice risk and assign you a risk classification.
Jack is the Head of Content & SEO at LeverageRx, a personal finance company exclusively for doctors.