Medical malpractice is defined as "any act or omission by a physician during treatment of a patient that deviates from accepted norms of practice in the medical community and causes an injury to the patient." Professional liability insurance (malpractice insurance) is carried by physicians and other healthcare professionals to provide coverage for potential exposures for medical malpractice. Practicing bare (without medical malpractice coverage) has become increasingly difficult. While only seven states require malpractice insurance for licensure (as of our most recent update), obtaining medical staff privileges at a hospital or other healthcare facility, enrolling with an insurer for third party reimbursements, or working as an employee or contractor for another party are examples where malpractice insurance coverage is required.

Malpractice insurance policies define the limits of coverage. Coverage limits define the amount per incident and the amount in the aggregate. Typical coverages for physicians are $1,000,000 per incident and $3,000,000 in the aggregate.

Malpractice coverage can be written in two methods. The first method, “Occurrence” coverage, covers events of malpractice that occur during the time frame the policy is in force regardless of when a claim is submitted. The second method, “Claims-made” coverage, covers events of malpractice when a claim is submitted. A physician or healthcare provider need only maintain an Occurrence policy for the specific time frame when a malpractice event might have occurred. In contrast, Claims-made policy coverage must be maintained for the full statute of limitations during which a claim may be submitted. After the termination of a Claims-made policy, a physician or healthcare provider must purchase an endorsement (known as “Tail coverage”) to cover the period of time, post policy termination, when a claim can be submitted.

Malpractice insurance specifies the type of physician or healthcare provider and the activities permitted (e.g. internal medicine, no surgery). Also, the malpractice policy may limit the “Scope of Duties” permitted, such as within an employment arrangement.

An understanding of the purpose of a malpractice policy, the coverage limits, the type of policy and what is included within the coverage is an essential understanding that a physician or healthcare provider must maintain.

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