What is Professional Liability Insurance?

Professional Liability Insurance Definition

Professional Liability Insurance (Malpractice) is a critical indicator of financial and clinical risk. For Health System Executives, verifying "Limits of Liability" (typically $1M/$3M) ensures the organization is not exposed to secondary liability if a practitioner is sued. During the "Credentialing and Verification" phase, organizations must track "Expirables"—the dates when these policies lapse. If a provider's insurance expires, their "In-Network" status must be suspended immediately. Strategically, tracking the "Paid Claims" history associated with a policy is a key quality metric. A provider with a high volume of settlements may indicate a clinical risk that outweighs their value to the network. Modern PLM systems automate the collection of Certificates of Insurance (COIs) to prevent manual tracking errors.

FAQs

What is the difference between "Claims-Made" and "Occurrence" insurance?

"Claims-Made" only covers incidents that happen and are reported while the policy is active; "Occurrence" covers any incident that happened during the policy period, even if the claim is filed years later.

Why is "Tail Coverage" a critical data point in provider transitions?

When a provider leaves a group with a "Claims-Made" policy, they need "Tail" coverage to ensure they are protected against future lawsuits from their time at the old group. Credentialing teams must verify this to prevent liability gaps.

How does the National Practitioner Data Bank (NPDB) relate to insurance?

Any payment made by an insurance company on behalf of a provider for a malpractice claim must be reported to the NPDB, which payers query during the credentialing process.