Malpractice Insurance: A Professional’s Friend in Need

Malpractice insurance is a type of professional liability insurance purchased by professionals who deal with clients directly, such as lawyers, beauticians, and construction workers. It provides coverage for malpractice lawsuits, as the name suggests, and includes coverage for damage to third parties from named perils.

Suppose you are a surgeon and a patient needs to amputate their left arm. There is a misunderstanding on your part, so you end up amputating their right arm, instead of the left arm. The patient decides to file a lawsuit against you. The judge rules in favor of the patient and now you owe them $5 million. With malpractice insurance, your insurer will cover the costs of the lawsuit as well as your attorney’s fees.

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What Does the Policy Cover?   

When you deal directly with clients, you are at risk of being sued for bad advice and negligence. Your malpractice insurance will cover the costs of defending lawsuits resulting from negligence or ignorance.

Any professional would benefit from malpractice insurance, but it is incredibly beneficial for practicing lawyers and medical professionals.

Malpractice Coverage for Lawyers  

Although lawyers insurance is mandatory only in Oregon and Idaho, other states prefer that their lawyers carry a malpractice policy. Attorney malpractice insurance covers lawyers from lawsuits arising from their legal practice.

Some additional duties that a lawyer might perform and get coverage for under the lawyer malpractice category are:

  • Acting as a trustee
  • Acting as the notary public
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how much is malpractice insurance for lawyers

Malpractice Coverage for Medical Practitioners  

Hofstra University published an article stating that 10 percent of deaths in the United States are caused by medical errors. Medical professional liability insurance is mandatory for health professionals in many states.

Usually, medical negligence cases include oversight during diagnosis, treatment, or post-treatment advice. When someone files a medical negligence case against you, you could potentially go bankrupt.

As per the Insurance Information Institute, the coverages of medical malpractice insurance are:

  • Legal fees and court charges

Medical malpractice insurance covers attorney fees and the costs of the court.

  • Arbitration costs

Arbitration costs incurs in cases where a patient demands a specific sum of money to withdraw a case and settle it out of court. If both the parties opt for an out-of-court settlement, the medical malpractice insurance companies pay for the arbitration costs.

Settlement costs that the healthcare malpractice insurance would cover include fines and penalties for in-court settlements and the amount to pay for out-of-court settlements.

  • Medical negligence damages

Some health care professionals are liable to pay for damage to the clients as well. Hence, healthcare malpractice insurance includes coverage for damages up to a fixed amount.

For instance, a patient consults a doctor after they fall off a one-story building. The patient needs a cast on their left arm, but the doctor, for some reason, doesn’t provide one. Since the injury is prolonged unnecessarily, the patient decides to sue the doctor. The doctor’s medical malpractice policy will pay out the patient for the damages.

The Two Types of Malpractice Coverage

A malpractice insurance policy can either be a “claims-made” policy or a “claims occurrence” policy. Since claims for negligence can be made years after the incident, understanding these coverages is essential.

A “claims-made” policy will provide coverage only if the policy was in effect both when the incident happened and when the case came up.

A “claims occurrence” policy will provide coverage if the incident happened in the policy period, irrespective of when the case came up.

how much does malpractice insurance cost

What Are the Common Exclusions of Malpractice Insurance?

Some actions related to malpractice cases are legally and ethically wrong. Therefore, these actions are excluded from the coverage of malpractice insurance.

Some exclusions from lawyer’s malpractice insurance are:

  • Legal services provided to a business owned by the insured
  • Fiduciary services (Fiduciary insurance could cover these services)
  • Property Damage (PD) or Bodily Injury (BI) as a result of the practices of the lawyer
  • Dispute settlement costs between two lawyers of the same attorney
  • Intentional fraudulent activities

Some of the common exclusions of medical malpractice insurance are:

  • Actions done when a person is intoxicated
  • Sexual harassment or misconduct
  • Fraudulent activities
  • Bodily injuries from auto vehicles (primarily related to transporting patients)
  • Damages from sources other than the named perils
  • Claims arising out of specific procedures
  • Claims arising from the misuse of personal information of patients

All malpractice policies exclude punitive damages. If a complainant proves that a professional’s mistake was intentional and leads to a severe consequence, it is considered punitive damage. These types of acts are punishable and uninsurable by law.

What are Common Endorsements For Malpractice Insurance?

Tail coverage for death, disability, or retirement is one of the most common types of malpractice insurance endorsement. This coverage is essential for professionals who are near their retirement age. Tail coverage will provide additional protection for claims that came up after the initial policy coverage period. In the case of disabilities or death, such policies come in handy.

Other endorsements to malpractice policies depend upon personal requirements. For example, a criminal lawyer can add security personnel coverage to their named perils. This is because the criminal lawyer might need added security while fighting with dangerous criminals.

One optional policy that you might add to your malpractice insurance package is the cyber liability clause. Many insurers have started adding commercial cyber liability insurance as an endorsement to healthcare malpractice insurance.

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Types of Insurance that Include Malpractice Insurance Policy

A few industry-specific insurance packages that include malpractice policy are:

What Factors Determine the Cost of Malpractice Insurance?

Malpractice insurance premiums vary from one policy to another. People belonging to different professions or different fields of the same profession have different insurance needs. Some factors that determine the cost of malpractice insurance are:

  • Location: Different state laws and minimum policy requirements make the location a prime factor when determining malpractice insurance price.
  • Specialty: Each area of specialty, whether it be legal or medical, has a different level of risk. For example, surgeons have more at stake than general physicians, and hence they need more coverage. Therefore, the risk of the field of specialty is directly proportional to the price of an insurance policy.
  • Claims history: A company’s claims history can influence how high or low the premium is. Most of malpractice insurance carriers give discounts based on the client’s history of claims. Usually, most carriers offer up to a 20% discount for a account with no history of claims.
  • Hours worked: The number of hours worked determines whether a professional is a part-time employee or a full-time employee. Generally, people working for more than 20 hours a week are full-time workers, and professionals working for less than 20 hours are part-time employees. Hence, full-time employees pay a higher premium as they require more coverage and vice versa.
  • Policy limits: Policy limits are the maximum amount that an insurer will cover an insured’s losses. Higher policy limits demand higher premiums. Therefore, the policy limits play a role in deciding the premium amount.
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Common Cases of Malpractice

Malpractice cases are most common amongst medical professionals. Some of the most common cases of medical malpractice are:

  1. Misdiagnosis: Misdiagnosis cases are when a doctor wrongly diagnoses, does not diagnose, or delays the diagnosis of a medical condition in a patient. For example, if a person has cancer, and the doctor ignores his complaints in the initial stage, this could lead to loss of life. Malpractice insurance will cover the doctor’s financial losses in case of a lawsuit.
  2. Childbirth injuries: Injuries to a child while in the womb or during the delivery are sensitive medical malpractice cases.
  3. Medication errors: Medication errors include prescribing or administering the wrong drugs or medicine to patients. These errors are a common claim source for medical malpractice insurance.
  4. Surgery errors: Errors during surgery are one of the most severe types of medical negligence cases. Surgical errors include operating on the wrong body part or making a mistake during the process of operation. If the patient files a lawsuit for such mistakes, it can cause a colossal financial loss for the surgeon.

Some common attorney malpractice cases are:

  1. Lack of communication: The lawyer avoids contact with the client and fails to respond to client requests for information.
  2. Negligence: The client loses the case because the lawyer missed filing documents before crucial deadlines.
  3. Action without consent: The attorney settles the claim without the client’s permission.
  4. Ignorance: The lawyer is unaware of the law or does not have adequate knowledge of the case.
  5. Privacy breach: The lawyer leaks personal and confidential information of the client to the opposite party or others.

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