Understanding Malpractice Policy Limits

AdobeStock_158770741.jpeg

Medical malpractice policy limits describe how much money an insurance company will pay on your behalf in the event of a claim. The policy limit consists of 2 numbers, a "per claim" limit and an "annual aggregate" limit. If a provider had a malpractice insurance policy with $1,000,000/$3,000,000 limits, he/she would have a $1,000,000 limit per claim and a $3,000,000 aggregate limit for the year. So how, exactly would that work?

Example #1:

A surgeon has 3 claims in a year, each paying $500,000. Is he covered?

Yes, all 3 claims would be paid. $500,000 is below the $1,000,000 per claim limit and the total for the year ($500,000 x 3 = $1,500,000) is also below the $3,000,000 aggregate.

Example #2:

A surgeon has 2 claims in a year, the first pays out $1.2M and the second pays out $500,000. Is he covered?

Partially. $1.2M is $200,000 higher than the $1,000,000 per claim limit, so the provider will be personally responsible for any amount above the $1M limit. The second claim would be covered, since $500,000 is below the $1,000,000 per claim limit. The sum of both claims falls within the $3,000,000 aggregate limit for the year.

What malpractice limits should I carry?

Depending on your risk tolerance, there are a wide variety of limits of liability available; however, some states have minimum requirements that must be carried. In addition to state requirements, oftentimes hospitals and 3rd party credentialing organizations will require a minimum amount of coverage in order to have privileges.

So how do you choose what limits are right for you? Start by talking to your group/employer to find out what limits your colleagues are carrying. It’s generally recommended that all providers in a group carry the same (or similar) limits. Some malpractice insurance carriers will require the corporation to carry limits that match the highest individual limit within the group, so if everyone carries $1M/$3M limits, but one person carries $2M/$4M, the corporation will have to carry $2M/$4M, as well.

Another consideration for determining proper malpractice policy limits is your geographic area, specialty, and scope of practice. Metropolitan areas are generally more litigious and often have higher claim frequency and severity, so be mindful of that when choosing your limits. Also consider your specialty and any unique attributes within your practice. Are you doing a large number of surgical procedures? More than the average surgeon? Are you doing a lot of mammography reads?  More than the average radiologist?  These types of questions are helpful when discussing options for malpractice policy limits with your insurance agent.

While it’s certainly a risk to carry limits that are too low, it could also be a risk to carry limits that are too high. It’s often speculated that doctors who carry very high malpractice limits are more of a target for plaintiff attorneys, as they’re seen as “deep pockets” with more potential money at stake. This is certainly a risk, so it’s important for providers to carry appropriate limits – not too high, and not too low.

Can I change my malpractice policy limits?

It is possible for you to change your policy limits throughout the course of your career, but be considerate of the type of insurance that you have. With Claims-Made coverage, any changes to your policy limits (higher or lower) will be retroactive; whereas Occurrence limit changes will be done on a go-forward basis (not retroactive). It’s important that you talk to a knowledgeable malpractice agent before making any adjustments to your policy limits to understand potential long-term impacts to your coverage.

Be sure to review your policy limits regularly to ensure they continue to meet state and 3rd party requirements and that they are at an appropriate level for your unique practice setting. A knowledgeable malpractice insurance agent is a valuable resource, as they help monitor market changes and can make suggestions if/when you may need to consider adjustments to your coverage along the way.