Buying Medical Malpractice Insurance
With the growing malpractice insurance crisis, doctors are increasingly looking for ways to minimize their premiums while maintaining mandatory and prudent levels of coverage. In addition, with the departure of many insurance companies from the industry, many doctors are finding themselves having to shop for a new insurance company.

Here are some points to consider when comparing professional liability/medical malpractice coverage:
  • Coverage limits - in some states, the state determines the minimum coverage required to practice in that state; in the rest, you are free to go it alone or pick the amount you feel is right for you. If you are engaged in a high legal risk specialty or have significant assets you need to protect, you may want to investigate higher limits. Policy limits are defined in terms of maximum payout per occurrence and total payout.
  • Type of policy - determines when and for when the policy is in force
    • occurrence - covers claims made anytime for incidents occurring while the policy is in force
    • claims made - only covers claims made and for incidents occurring while the policy is in force
    • tail - covers claims made after the policy expires for incidents occurring while the policy was in force
    • nose - covers claims made while the policy is in force but for incidents occurring before the policy was in force
    Generally, "claims made" plus a "tail" equals "occurrence" coverage.
  • There are primarily three types of relationships between you and the insurance company:
    • purely as a customer - you pay your premium and you receive your coverage; in some cases, you are also required to advance an equity payment to help finance the company's reserves, and this equity investment may have no investment value and may have a lot of conditions that prevent its return, such as automatic forfeiture if you decide to switch insurers in the future.
    • participation in profit - some companies, typically smaller ones formed by doctors, are "exchanges" or "interchanges" that operate much like a cooperative in that there is a professional manager but the company is governed by the members and the members share in any profits generated.
    • responsibility for losses - some low cost policies require you to continue to pay money to liquidate the insurance company's debt in the event of a bankruptcy
  • Consent to settle - your right to agree to a settlement; an important feature as it allows you protect your reputation and minimize future insurance costs by nixing the insurance company's decision to settle
  • Financial soundness - even if you are only a customer of the insurance company, its future viability is important. If your insurance company goes bankrupt, you may have to provide your own defense and pay a significant larger portion of any settlement. For example, in New Jersey, the guaranty association that backs up the insurance companies will only pay up to $300,000 per claim if the insurer goes bankrupt. Often times, smaller companies use "re-insurance" -- essentially

    insurance for insurance companies, which provides them greater protection for losses by sharing the risk.
  • Legal prowess - it is to your advantage to find a company that is easy to work with and has a good record defending against suits. Not only will this keep your insurance costs down, but it will better protect your reputation than a company that frequently loses.

Updated October 26, 2004 - go to our home or commerce page