The average malpractice lawsuit incurs $30,000 in defense costs, while some cases incur legal expenses upwards of $100,000.
Does malpractice insurance cover legal fees? Yes. Your medical professional liability insurance policy will cover the legal expenses when defending you against claims of malpractice. If it does not, you have a very weak policy and should look into a better option right away. MedPLI can help you by reviewing your current policy at no cost to you.
You should distinguish whether your policy would pay defense costs in addition to your policy limits or if defense costs erode your limits. This policy provision is important to understand, because it can have major implications in the event of a lawsuit.
If your policy limits are eroded by defense costs, it is not ideal. This is referred to as defense within the limits, whereas you want defense in addition to the limits if possible.
For example, let’s say your policy limits are $1,000,000 per claim with a $3,000,000 aggregate limit. If your case costs $100,000 to defend, and there is a judgment of $1,000,000 against you, there is a shortfall. The $100,000 defense costs count against your $1,000,000 limit, so your policy will only pay $900,000 of the judgment to the plaintiff. To satisfy the full judgment awarded in the case, you would still owe $100,000 – not good! Since your policy would come up short in this instance, you would face paying the $100,000 shortfall from your own personal assets.
In contrast to the above example, most doctors have a policy that provides coverage for defense costs in addition to their limits of liability. With this policy provision, your $1,000,000 limit would be fully intact at judgment, so you would not have the $100,000 shortfall.
Ask your broker for a policy with defense costs in addition to, rather than within, the limits of liability. If you would like a free policy evaluation, contact MEDPLI and ask to speak with one of our insurance brokers.
