Malpractice Insurance Part 2 – Limits of Liability

When reviewing a malpractice insurance policy, you’ll generally see something that looks like this

Malpractice insurance carries two types of limits: occurrence and aggregate. An occurrence limit specifies the maximum amount an insurance carrier will cover a single claim while an aggregate limit specifies the total amount the carrier will pay out over the entirety of the policy period.

The aforementioned image represents the most common limits of liability for CRNAs requiring malpractice coverage in the United States. The insurance carrier will cover up to $1,000,000 for a single claim (or occurrence) and up to an aggregate total of $3,000,000 of all claims filed over the course of a year. Only 3 states have a different limits of liability. Texas and Michigan require an annual limits of liability of $200,000/$600,000, while Florida requires $250,000/$750,000.

While it may seem like a lot of money for coverage, it is important to remember that carrying malpractice insurance goes beyond paying just a claim. You also need to consider the legal costs of defending a claim. To use an outrageous example, let’s assume plaintiff is looking for $500,000 in damages and your legal defense costs $500,000. Well, there are other fees associated with your coverage that you may end up being responsible for paying because you’ve maxed out your coverage. These fees include deposition fees, administrative expenses, the loss of earnings if you’re unable to work due to a suspended license due to an investigation on the claim, etc. Sure, it’s an extremely unlikely scenario, but the point I’m illustrating is how the costs of a claim along with the ancillary costs of defending that claim can quickly add up.

Which brings us to some important questions you need to ask your insurance carrier.

Are fees such as deposition fees, administrative hearing fees, loss of earnings due to time away from work to attend these hearings covered by your policy? If not, can you purchase them for a premium?

Another important question to ask is how is a claim formally defined by the insurance policy? How this term is defined has major implications on your ability to file a claim because what you think is a claim and what your insurance company thinks is a claim may be two totally different things. Anyone who has ever attempted to collect on insurance payments in the past for any reason can attest to the astonishing disappointment one experiences when a request for compensation is denied due to a technicality. So, it’s important for you to understand how your policy defines a claim in order to make sure you know what events will actually prompt coverage for you. The last thing you need to be worried about is finding out at the last minute that your policy won’t help you because you didn’t meet the criteria for a claim to be successfully submitted. So, make sure you ask your insurance carrier.

Lastly, ask is your policy requires a consent to settle. In other words, does the insurance carrier need your permission to settle a claim or do they make the decision irrespective of whether you agree to the terms. The implication behind knowing the answer to this question is if the insurance policy is looking out for your interests or theirs? Sometimes it might make more financial sense for a company to settle a claim that could adversely affect your licensure because they don’t want a drawn out, expensive legal battle to ensue. So it’s important for you to know whether or not you have the right to consent to settle.

To sum:

Two types of limits of liability: occurrence and aggregate. Generally, the limits are $1,000,000/$3,000,000, respectively. There are 3 states (Texas, Michigan, Florida) that require a lower limit of liability.

Malpractice coverage involves paying out a claim AND paying the legal costs of a defending a claim.

Questions to ask your insurance carrier:
1. What additional fees are covered by the policy (e.g., deposition, administrative hearings, etc.)?
2. How is a claim defined by the policy?
3. Does the policy have a “consent to settle?”

In the next section of malpractice insurance, we’ll cover types of insurance companies.


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