One of the most overlooked features of a medical malpractice insurance policy is how the company handles the cost of defense—the cost of lawyers, court fees, and trial fees when a case is taken to court. Sometimes, in an effort to cut costs, insurance companies can tweak this important coverage. The physician is the one hurt in the event of a large claim.
I would first like to explain what it means to have defense costs inside or outside the limit of liability. When we mention the limit of liability, we mean the limit of liability that is noted on the declarations page of the medical malpractice insurance policy. So, if a physician or surgeon in Florida has policy limits of $250,000 per occurrence/$750,000 aggregate, it means that, for one claim the medical malpractice insurance company is going to pay a maximum of $250,000. In one year, the total amount the medical malpractice insurance company in Florida will pay for all medical malpractice claims is $750,000.
In this case, it is obviously very important to determine whether the defense costs are paid inside or outside the limit of liability. If defense costs are paid inside the limit, and the cost of defending the doctor is $100,000, that physician now has only $150,000 available to pay a judgment or settlement. If the defense costs are paid outside the limit of liability on the medical malpractice insurance policy, the full $250,000 is available to pay a judgment and the $100,000 in lawyer fees, investigation expenses, defense and appeal expenses will not erode the physician’s limit of liability.
At first glance, this difference may not seem important. But if you were faced with a large claim, defense costs can add up very quickly and you could find yourself with no money left to pay a judgment or settlement of additional claims. Once the liability limits have been used up, your medical malpractice insurance company has no further obligation to pay any claim, judgment or claim expense or to defend or continue to defend you.
So, when purchasing or renewing your medical malpractice insurance in Florida, review it carefully with your agent to be sure defense costs are outside the limit of liability. This small difference could spell the difference between success or failure of your practice.