Medical professional liability insurance, sometimes known as medical malpractice insurance, is one type of professional liability insurance which protects physicians and other licensed health care professionals (e.g., dentist, nurse) from liability associated with wrongful practices resulting in bodily injury, medical expenses and property damage, as well as the cost of defending lawsuits related to such claims.
A medical professional liability insurance policy covers bodily injury or property damage as well as liability for personal injury such as mental anguish. The complexity involved in discovering negligence results in a higher percentage of premium dollars going toward defense and cost containment expenses. Medical liability insurers spend substantial funds investigating and defending claims where there is an adverse patient outcome not resulting from negligence.
There are two basic types of malpractice insurance—occurrence or claims-made. Many insurers write on a claims-made form basis where a policy in effect at the time a claim is reported responds for the loss, while the policy remains in force and during any applicable extended reporting period. The policy that was more popular in earlier times is occurrence-made which covers a loss that “occurs” during the policy period, regardless of when the claim was made, and even after the policy has been canceled.
The medical professional liability insurance market has occasionally experienced times of crisis, such as during the late 1990s, leading to high prices for policyholders. These times were marked by volatile changes in premium, declines in investments, rapidly increasing loss ratios as a result of increases in claims payments and defense and cost containment expenses, and the development of a large reserve deficiency. The NAIC publishes a report (Countrywide Summary of Medical Malpractice Insurance) that shows loss ratios were very high in the late 1990s, peaking in 2001. Loss ratios have since declined in recent years and prices have fallen.
Insurance regulators have evaluated the availability and affordability of medical professional liability insurance in the past, such as in the 2004 Report titled “Medical Malpractice Insurance Report: A Study of Market Conditions and Potential Solutions to the Recent Crisis.”
In order to better understand claims associated with medical professional liability insurance, some states require closed claims to be reported to the state insurance department. In 2010, a “Guideline for Implementation of Medical Professional Liability Closed Claim Reporting” was adopted by NAIC membership which made recommendations for implementing the NAIC Medical Professional Liability Closed Claim Reporting Model Law.
What is ‘Malpractice Insurance’
Malpractice insurance is a type of of professional liability insurance purchased by health care professionals (and sometimes by other types of professionals, such as lawyers). This insurance coverage protects health care providers against patients who sue them under the claim that they were harmed by the physician’s negligent or intentionally harmful treatment decisions.
A study by the Massachusetts General Hospital Department of Medicine concluded that most medical doctors will need malpractice insurance sometime during their professional career – and for good reason. Medical negligence is the third leading cause of death in the United States, and it can happen during diagnosis, during treatment or as part of advice given for treatment after an illness. Between 80,000 and 100,000 deaths in the US every year are caused by diagnosis errors, and 195,000 patients die in hospitals each year due to preventable mistakes.
In the US alone, 15,000 to 19,000 medical malpractice suits are filed every year, and $38 billion was paid out between 1986 and 2010 for misdiagnosis of a patient. However, 80 percent of medical malpractice cases end with no payouts at all. In a medical malpractice lawsuit, the plaintiff needs to prove a medical professional violated the general standard of care of a patient, as defined by the medical community. In order to be successful in a medical malpractice lawsuit, three things generally need to happen:
The plaintiff’s attorney must prove there was a breach of medical protocol that resulted in a practitioner choosing a different course of action than a colleague would have taken.
The medical professional causes physical or emotional injury.
There must be sufficient evidence proving the medical professional caused the damage.
States require that medical professionals have current malpractice coverage to work in hospitals and other medical facilities. Medical malpractice insurance premiums are usually based on the physician’s specialty and geographic location, not on claims experience. This means that even if a physician has never been sued, he or she can end up paying extremely high premiums. The premiums can become high because of such factors as amount of coverage needed, claims severity, claims frequency, location of practice and laws in the area. Only about 5 percent of physicians are responsible for about 54 percent of medical malpractice penalties. Medical malpractice premiums tend to rise, on average, about 0.5 percent annually.
Lawyers are also required to carry malpractice insurance to cover any real or perceived failure to render professional services.