Understanding Medical Malpractice Insurance Coverage and Concepts
What is Medical Malpractice?
At its most basic, medical malpractice is an act of negligence by a healthcare provider that results in damages to another person. Negligence is defined as committing an act, or failing to act, in such a way as a “reasonably prudent” person would act under the same circumstances, that results in harm to another person. In the case of medical professional liability, the “reasonably prudent” person is generally considered to be a healthcare provider with the following characteristics:
1. The same specialty as the healthcare provider who is accused of negligence (for example, neurology, cosmetic surgery, chiropractic medicine, general practice, or some other area);
2. A similar level of education and experience;
3. Compliant with the standard of practice in that field in the medical community.
If the complaining party can prove that the provider was negligent, he or she must also prove that damages were sustained. In a medical injury case, damages can consist of death, injury, the need for medical care, inability to work, psychological distress, pain and suffering, and a litany of other adverse results.
Importantly, the damages must be a “direct and proximate” result of the negligence. This means that there must be direct and uninterrupted causation between the negligent act and the damages. There can be no intervening cause, because that would break the line of causation.
What is Medical Malpractice Insurance and to Whom Does it Apply?
Medical malpractice coverage is a form of liability insurance. The people who purchase it are healthcare practitioners.
The practitioners are from all parts of the healthcare spectrum. Therefore, the language of the policies will vary to take into account the differences in the type of services rendered and the kind and causes of loss if a patient is injured due to the practitioner’s negligence. For example, the policy issued to a dentist, to a chiropractor, and to an orthopedic surgeon will differ somewhat to reflect differences in their healthcare practices.
This professional lines liability coverage may also be purchased by healthcare groups such as group practices, or institutions such as clinics or hospitals. These policies are intended to protect both the practitioners who work at the institution and the institution itself from claims of negligence.
It is important for the institution to have coverage to protect it from claims resulting from its own negligence. But it is also important to have it because of a legal principle called “vicarious liability”. That term refers to the fact that the institution can be held legally responsible for the negligence of others based upon a relationship of one with the other. These relationships can include employment of a physician by a hospital, or membership of one in a group practice. In either event, the potential exists for a claim against the institution or group if a claim is made against the individual.
How does Malpractice Coverage work?
Medical malpractice insurance operates similarly to other liability insurance policies. It protects the insured in three primary ways:
1. If a claim is made against the insured, the insurer investigates it at its own expense. This involves interviewing the insured and all people with knowledge about the occurrence. The insurer also gathers documents, such as files of its insured, and documents that support the damages claimed by the person alleging negligence. If the insurer concludes that the insured was negligent and that damages were sustained, it will try to settle the claim within “policy limits”. Policy limits refers to the dollar amount of protection provided by the policy.
2. If the claim cannot be settled and a lawsuit is filed, the insurer will hire a lawyer, at its expense, to defend the insured on issues of liability (fault) and damages. Some policies provide that the amount paid to defend the insured erode policy limits, Others have extended coverage limits for additional defense costs.
3. If, after trial, the insured is found legally liable for damages, the insurer will pay them subject any other terms of the policy.
It is important to note that, like other liability policies, the medical malpractice insurer “controls the defense”. That means that in general, the insurer can decide whether to settle the claim before suit is filed, during trial, or dispute the claim all of the way through trial. It can also elect to appeal the court’s decision.
HOW IS MEDICAL MALPRACTICE PURCHASED?
Professional coverage is purchased through an independent agent or broker who is licensed by the State in which they operate to transact property and casualty business. The licensure of agents is granted by the State Department of Insurance. One who wishes to purchase this kind of coverage will need to contact an independent insurance agent who offers professional coverage lines.
Decisions must be made about the insurer to select, how much coverage to be purchased (“policy limits”), the amount of the “deductible” (the amount that the insured must contribute toward damages or costs of defense) and the form of the policy (“occurrence” or “claims made”). The experienced agents at Insurance Plus will be able to assist with these issues and decisions.
© Luke S. Brown, 2011
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