The language of a policy will stipulate whether defense costs are either within the policy limit or in addition to the policy limit. The manner in which an insurance company handles defense costs will impact the actual amount of coverage a physician has available.
If defense costs are in addition to policy limits, a physician could have a $1 million judgment against them and not have any personal exposure. For example, assume a very complicated malpractice case is filed and the physician had policy with limits of 1M/3M. There is a tremendous amount of discovery, prolonged depositions, and a jury trial. Conceivably, defense costs could easily reach $150,000. Assume this case resulted in a plaintiff’s verdict of $1 million. Payment of the verdict would be made as follows:
Defense Costs In Addition to Policy Limit
Defense Costs Within Policy Limits
The conclusions are obvious.
- The better malpractice insurance policy states that defense costs are in addition to policy limits.
- If one policy states defense costs are in addition to policy limits and another policy states defense costs are within policy limits, even though the policies both may be issued with 1M/3M limits, the policy with defense costs in addition to policy limits actually provides more coverage for the physician.
- Understand this provision in your malpractice insurance policy!
If you have any questions about your policy and defense costs, please give us a call at 800-807-8877.