Malpractice insurance is a physician’s first line of defense
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Concerns about potential malpractice liability are top of mind for many physicians of all specialties. This is not surprising given recent verdicts in medical malpractice actions that have awarded millions of dollars in damages to plaintiffs.
Even outside of high-profile malpractice cases, most physicians are aware that the nature of their work puts them at higher risk for liability than those in other professions. Most also know that their physician colleagues across the United States can and do face judgments that can put their personal assets in jeopardy and would like to take steps to protect themselves and their families.
Malpractice insurance basics
Perhaps the most obvious way to protect against medical malpractice claims is to purchase medical malpractice insurance, a fundamental form of coverage that physicians and other health care professionals rely on to mitigate legal and financial risks.
Medical malpractice insurance, as its name suggests, is highly specialized and specifically tailored for professionals working in the health care profession, including physicians, surgeons, nurses, dentists, physician’s assistants and others who directly provide medical care to patients.
Given the complexities and high stakes involved in health care services, malpractice insurance is often mandatory for health care professionals to ensure adequate protection against potential claims and legal actions arising from medical errors, surgical mistakes, misdiagnoses, medication mistakes and other instances of substandard care or negligence.
Scope of coverage, policy types
Medical malpractice policies typically provide financial protection in the form of defense costs, settlements and judgments arising from malpractice claims — within policy limits. Moreover, some malpractice insurance policies offer additional benefits, such as coverage for disciplinary proceedings, licensing board investigations and loss of earnings due to legal defense.
To ensure they have the appropriate coverage for their specialty and unique situation, physicians should understand the features and benefits, coverage limits and key exclusions of their current malpractice insurance or any policy they are evaluating. They should also know the key differences between the two main types of policies — claims-made and occurrence-based.
A claims-made insurance policy provides coverage only for incidents that occurred and were reported while you are insured with that carrier. Thus, both the incident and the filing of the claim must happen while the policy is in effect.
Occurrence-based coverage provides lifetime coverage for incidents that occurred while the policy was in effect, regardless of when the claim is filed. Thus, if you had an occurrence-type policy in effect for the calendar year 2021, and a patient files a claim in 2023 for an incident that happened during 2021, the policy covers you for that claim, even if you no longer have insurance with that carrier.
Claims-made policies are typically less expensive than occurrence-based policies for the first several years of coverage because the potential for claims builds slowly as policy years accumulate. In comparing the costs of malpractice insurance policies, be sure to ask how much the premium will increase after the first year.
Other liability and coverages
While medical malpractice liability is usually a first concern, physicians face other sources of liability in their professional and personal lives. These include employer liability, issues related to billing, HIPAA violations, premises liability and personal liability for driving, rental property ownership and actions of family members. To augment the protection provided by their medical malpractice coverage, physicians should consider the purchase of other key policies, including property and casualty, general liability and cyber liability insurance. Working with a knowledgeable and experienced insurance agent is essential for all types of policies.
Comprehensive asset protection plan
Despite a physician’s diligent training and careful practice of medicine, mistakes and bad outcomes can occur, and can lead to medical malpractice claims, complex legal battles and substantial financial damages.
While a properly designed malpractice insurance policy is a solid first line of defense against these claims, it is only one component of a physician’s comprehensive asset protection plan. The goal of asset protection planning is to position a physician’s assets to make it difficult, and in certain cases nearly impossible, for a future lawsuit plaintiff to gain access to them.
A well-executed asset protection plan combines malpractice and other types of insurance with legal tools, such as trusts, exempt assets and limited liability corporations (LLCs), to shield personal and practice assets from future claims. Physicians should work with an asset protection specialist to implement a multi-tiered plan early in their careers, so that they can rest assured the assets they work hard to build remain protected from potential liability threats.
Reference:
Wealth Planning for the Modern Physician and Wealth Management Made Simple are available free in print or by ebook download by texting HEALIO to 844-418-1212 or at www.ojmbookstore.com. Enter code HEALIO at checkout.
David B. Mandell, JD, MBA, is an attorney and founder of the wealth management firm OJM Group www.ojmgroup.com. He can be reached at 877-656-4362 or mandell@ojmgroup.com.
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