Malpractice insurance: Understanding the importance of coverage limits

Malpractice insurance: Understanding the importance of coverage limits

When buying a medical malpractice insurance policy, most physicians specialise in premium prices. however physicians buying a malpractice policy ought to conjointly specialise in obtaining the correct coverage limits.

If limits square measure too low, the MD is needlessly exposed to private liability. Too high, and therefore the MD is paying for a lot of coverage than required.

A coverage limit may be a provision in an exceedingly policy underneath that the insurance firm says that it'll solely pay money for losses sustained by the client up to a definite dollar quantity. If the loss exceeds that dollar quantity, then the client is chargeable for paying the surplus.

In insurance, most policies have 2 coverage limits: A per-occurence limit ANd an combination limit. The per-occurrence limit states what proportion the underwriter can pay for one loss, claim, or prevalence. AN combination limit is that the total quantity AN underwriter can pay for all claims in an exceedingly given policy amount, generally for one year.

The most common coverage limit seen in an exceedingly medical malpractice insurance policy is $1 million per prevalence and $3 million in total per annum.

There square measure many difficult problems that physicians got to remember of once addressing coverage limits. the primary is that the issue of connected claims. Most medical malpractice liability insurers can take the position that 2 separate claims of medical malpractice arising out of an identical set of connected facts constitutes one prevalence or claim for insurance functions.

This is vital as a result of if multiple claims square measure thought of one prevalence for insurance functions, the claims are going to be ruled by one per prevalence coverage limit.

Another vital issue is defense prices. In most medical malpractice insurance policies, defense costs—attorney, expert, and court fees—are not enclosed within the coverage limits. If there's a $1 million per-occurrence limit and a medical malpractice judgment award is $900,000, however before judgment the insurance firm incurred $300,000 in attorney’s fees and prices to defend the insured, the complete $900,000 judgment award are going to be thought of by the underwriter to be at intervals the coverage limit.

However, some medical insurance policies square measure self-liquidating, which means that defense prices square measure enclosed at intervals the coverage limits. If this can be the case, the coverage limits are literally not up to the MD would normally expect them to be. If defense prices square measure enclosed, it considerably reduces the coverage limit of the policy.

What happens once the coverage limit is reached? In most circumstances, the underwriter merely tenders the defense of the claim back to the insured. this suggests that it's currently the insured’s responsibility to rent attorneys to defend the claim. Some policies do give that the underwriter can still give a defense even once the coverage limit is reached.

Excess insurance or AN umbrella policy is coverage over and higher than a primary policy. If a judgment exceeds the boundaries of a primary policy, the MD is in person chargeable for the distinction, at that purpose AN excess or umbrella policy kicks in. this can be a vital safeguard for physicians.

Roy W. Breitenbach, JD