Understanding Malpractice Insurance

It is important that you understand malpractice insurance. It makes the difference in being covered or not if you are ever hit with a malpractice claim. Malpractice insurance is a type of professional liability insurance that will cover a nurse practitioner from liability arising from a patient’s injury or death. It is a requirement in most states to practice. In addition, it is a smart policy to have in combination with other asset protection strategies.

If I was ever sued for malpractice, I would not be worried about personal or business assets being forfeited. Even if they were, I have strategies in place like transferring assets offshore if that worst-case scenario was to happen. You should too.

Medical malpractice is typically obtained through various insurance carriers. You can obtain a personal policy or obtain a group policy if you are part of a small practice or own a practice. Who are the top carriers for malpractice policies for nurse practitioners?

  1. Berxi
  2. CM&F Group
  3. Cunningham Group
  4. NSO (expensive for what it is)

It is important you shop around different carriers. It is also important you make sure they cover the services you are interested in. Some don’t cover hormone replacement treatment while others do. You need to ensure that what you want to do is covered. This is vital!

There are two types of malpractice policies: claims-made and occurrence. It is essential you understand the differences because they could make the difference in being covered or not.

A claims-made policy will only cover the provider while the policy is in effect both when the incident took place and when the lawsuit was filed. Do you see the issue with that? As soon as that policy expires, you are no longer covered. Insurance companies will nickel and dime the provider and increase the renewal rate year by year. You do not have a choice if you want to be covered. Most of the time a considerable amount of time might elapse between the incident and when a claim is made. If you decide to cancel the policy with that insurer, you will need to purchase “tail” coverage. This extends the coverage for a set amount of time after the policy ends. Typically, this will be within the statute of limitations for a claim to be filed in your state (3-7 years typically). Tail coverage can be expensive. It can easily be 2x the amount of the annual malpractice insurance premium… It is a necessary evil if you want to be covered.

Occurrence policies will cover any claim that occurred during the period of coverage, even if the claim happens after your policy expires. This is the type of coverage you should strive for obtaining. It covers you for as long as you need it to. So, if you saw a patient while you had your occurrence policy, and then sued 5 years later and you canceled that policy, you would still be covered. This type of policy is generally more expensive than claims made policies and usually have limitations associated with them. They usually do not cover telemedicine, hormone replacement, aesthetics, and weight loss services. They also do not require tail coverage in most instances.

You also need to understand the other details of malpractice. What does it cover exactly? What are the exclusions? Does it also cover all the legal fees associated with a malpractice claim? Will it cover attorney fees associated with disciplinary actions from the board? Ensure you understand every aspect of coverage with the policy you are purchasing. Paying a lawyer $400 to review a policy before you buy it is a worthwhile cost in my opinion. If you are good at reading legal jargon, then forgo that expensive if your confident you understand the policy.

What about limits? What the hell does a coverage limit even mean? It means that the policy will only pay for losses sustained by the medical provider up to a certain amount. If the judgement exceeds that number, then the medical provider is responsible for paying the excess.

Most malpractice policies have two coverage limits: Per-occurrence and aggregate limits. The per-occurrence limit is what the insurer will pay for a single claim or occurrence. An aggregate limit is the total amount an insurer will pay for all claims within the policy period.

For example, when you see a malpractice policy there will be limits such as a $1 million per occurrence and $3 million aggregate. This means the insurer will pay up to $1 million in losses per claim and $3 million total over the policies period. So, if you were sued twice, you would be covered. If you were sued four times, you would be SOL.

The issue however is that defense costs are not separated from these limits. If you were to have a malpractice claim against you and the judge awarded the plaintiff $950,000 yet the defense costs were $200,000, then the insurer would only pay up to $800,000 for the claim if you had a $1 million occurrence limit. You would be on the hook for the other $150,000. This is why it is important that you read your policy thoroughly and see if defense costs are separate from the coverage limits.

This is also another reason why it is important to have multiple asset protection strategies in place such as having multiple LLCs, spreading your assets among multiple entities including LLCs and trusts, having personal umbrella policies, having a percentage of your wealth in gold and tangible items, putting assets offshore, etc. This protects your assets.

We play a risky game. That is part of advanced practice. Lawsuits can and do happen. All you can do is protect yourself. Understanding malpractice is the first step in doing so. I would advise having an occurrence policy if you can afford it. Claims-made policies are worthless if the claim is filed against you after the policy expires. Remember that.

38 Responses

  1. Thank you for this. Very to the point and makes sense. I love your blog, it has been so beneficial to my career!

  2. Great information. I always check the policy that my employer has for me. You need to ensure you are covered.

  3. Thanks for pointing out that medical malpractice insurance has limits before the medical provider would need to pay the excess. I’m planning to get one for myself because I’m contemplating on getting a few cosmetic procedure in the future, mainly Botox injections. Knowing the risks of such procedures definitely calls for insurance in order to protect myself.

      1. Hi Justin. For weight loss and hormone therapy, is there a company you recommend to reach out to? Do you recommend an individual or group policy as a business owner? ( no employees, just the two owners)

  4. Hey Justin!
    What are your thoughts on cannabis card telemedicine company? CM&F? Any ideas on limits for this type of work?


    1. Minimal liability… Medical cannabis is practically liability free. CM&F at your states limits would be just fine.

  5. What kind of malpractice insurance would an RN need (not an NP) who runs & owns the business and collaborates with an MD? And what would the MD need for malpractice?

    1. An umbrella malpractice policy for the company. You can write in the MD under that policy or just have them have their own. Either way. Just talk to a broker and see what the best option is. Use the Elite NP GPO vendor for a quote if you want. Link at the top of the page.

  6. NP here starting my own practice in New York State. Mostly focusing on pain management–trigger point injections, non-narcotic meds, medical marijuana cards. I’ve been comparing NSO with Berxi and the difference is astronomical; $4000 vs $1000. I know NSO is very comprehensive, but it almost seems like over coverage. Any thoughts on this?

    1. NSO is a rip off. I have Berxi as well and feel confident I am covered with them. What I do is written into the policy with them.

  7. Do you apply for your LLC in another state, Wyoming for example before applying for one in your practice state? Now, do you have to have an address in said out of state? And do you name the businesses the same, same address, contact info etc? Sorry….so confusing. Thanks so much!

    1. Catherine,

      Don’t complicate this. The only reason you want a WY LLC is to have it as a holding company for any LLCs underneath it because WY LLCs are 100% private. To file for an LLC in another state, it needs to be attached to an address, so that is where virtual addresses are used or the LLC creation service you use will give you an address.

    1. Either one. You will just need to negotiate that with the collaborator. Often times they can just add you to their policy and vice versa for a minimal cost.

      1. If you were to negotiate getting added to MD collab policy, do you need to get any additional coverage?

  8. For a start up general psychiatric NP business, malpractice ins, $500k/claim & $1M/aggregate is suffice initially or should I get a higher policy, $1M/claim & $3M/aggregate? No niche just general psychiatric facility. Help!!!!

    1. Just get the maximum amount you need for your states malpractice limits. In my state, the max someone can sue me for is $1mil, so I don’t bother getting more than that.

  9. In my state, (NC) it looks like the max that some one can sue me for (per claim, I assume) is $500,000. Is that all I really need? If so, what would be an reasonable aggregate amount to get?

  10. I am interested in started a telehealth business for urgent care (colds, flu, allergies), STD, PrEP. My next business will hopefully be medical cannabis. Would you recommend occurrance or claims-made? Also, my LLC will be through Wyoming do I use Wyoming as the state of practice or the state I reside in? Thank you!

    1. Occurence is more ideal in my opinion. You will not use WY for the state you reside or practice in unless you are doing so. it is just where your LLC is located, nothing more

  11. Is professional liability enough if you are just a solo LLC telemedicine practice? Why would general liability by needed?

  12. I contacted CM&F Group. Their coverage for my needs were actually affordable. In fact, it was affordable, to the point of disbelief. I am incomplete confusion, as to why some of these other insurance companies are so expensive. Is this a reputable group? Will I be adequately protected should something arise? I’m so stressed out and nervous.

  13. For a mobile IV hydration business (PLLC) would we need any other insurance for our business other than professional liability and general liability?

  14. CM& F is covering both my medical and aesthetics business. Justin, does that seem OK to you. They say they cover based on the scope of what a nurse practitioner can do. So, I pick the level that would cover me for both my medical services, as well as my aesthetic services. Do you know of other NP’s with hybrid clinics doing the same thing with CM & F?

  15. I have just found out that despite my previous employer stating that they would cover my malpractice (which is included in the wording of my contract) that they did not have malpractice insurance on me. They appear to only have business liability. It does have a section that is labeled Professional Liability/Errors and Omission (Claims Made 1m/1m). When asked repeatedly for a copy, I got a run around. Eventually almost 2 months after being laid off due to financial issues of the company I received a copy of the policy with a start date four days after I was laid off.

    They are insistent that this was what they were willing to cover but did not ever inform me (or the other NP) that they didn’t have intentions on having actual malpractice to cover individual providers.

    What are my options here? I only worked there for 2.5 months and no, I did not have an individual policy. I have definitely learned my lesson and plan on always carrying my own policy now. Do I have any recourse here and or any way to protect myself if a lawsuit occurs later down the road? Also, I think my state makes it a requirement to have malpractice insurance, so does this type of insurance even cover that requirement?

    1. Doubt you have an option… I have never heard of a malpractice company retrodating a policy. If you were sued, I would then counter sue the employer for lying to you. Just hope nothing ever happens.

  16. I am in the beginning stages and just completed the telemedicine course. I am interested in offering weight loss services and medical marijuana in DC and Maryland. My LLC is registered for Maryland, do I need a LLC for DC if I plan to service that area as well via telehealth? Also as far as malpractice insurance goes will I need professional liability and general liability? I think I saw an earlier comment where you said professional liability should be enough for telehealth I just want to be sure. Thanks in advance!

    1. I would just stick to the Maryland LLC.

      You don’t need general liability for a telemed business.

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