The nursing profession involves constant patient care decisions, creating exposure to potential legal claims alleging professional negligence or error. While most nurses work for employers who provide liability coverage, individual professional liability insurance, often called malpractice insurance, is widely recommended. Securing an individual policy offers a dedicated layer of protection that addresses significant gaps in employer-provided plans.
What is Professional Liability Insurance for Nurses
Professional liability insurance, frequently called malpractice insurance, protects nurses from financial loss resulting from a lawsuit. This policy safeguards a nurse’s personal assets and career when a patient claims negligence or harm caused by professional services. The coverage helps manage the substantial legal costs associated with defending against such allegations.
This insurance covers defense costs for both proven mistakes and unfounded claims. Allegations often stem from situations like medication errors, failure to properly monitor a patient, or documentation mistakes that lead to an adverse outcome. Even when adhering to high standards of care, a nurse may still be named in a lawsuit, and the policy ensures they have the necessary resources for a strong legal defense.
The Difference Between Employer and Individual Coverage
Employer-provided liability coverage is structured primarily to protect the facility or hospital, operating under the legal concept of vicarious liability. The policy’s main objective is to defend the organization’s financial interests when a claim arises from an employee’s actions. The nurse is typically covered under a shared policy, and the organization’s legal team is obligated to act in the employer’s best interest.
Individual professional liability insurance names the nurse as the insured party, making their interests the policy’s sole priority. This guarantees the nurse dedicated legal counsel, separate from the employer’s defense team. If a conflict of interest emerges between the nurse and the hospital, the individual policy ensures the nurse’s career and assets are independently protected. Employer policies often have shared limits, meaning the total coverage amount is divided among all covered employees, which may be insufficient if a large claim is filed.
Why Individual Coverage is Necessary for Nurses
Relying solely on an employer’s policy leaves a nurse exposed to scenarios where coverage may be limited or nonexistent. Employer coverage is generally limited to professional activities performed during working hours and within the scope of the facility’s policies. Claims arising from volunteer work, moonlighting, or providing advice outside of the workplace are typically not covered under the employer’s plan.
A significant gap occurs when a nurse is named as the sole defendant, or when the employer brings a counterclaim against the nurse to shift liability. In these instances, the employer’s legal team will not prioritize the nurse’s defense, potentially forcing the nurse to fund their own legal representation. An individual policy also provides portable coverage, remaining active even if the nurse changes jobs or is temporarily between positions. Additionally, the employer’s policy limits can be exhausted in a major claim, exposing the nurse’s personal finances to a judgment or settlement.
Specific Protections Offered by Malpractice Insurance
Individual malpractice policies provide distinct forms of protection that extend beyond covering a settlement. These features protect the nurse’s professional standing and financial stability during legal challenges. The average cost of a nurse malpractice claim was over $210,000 in 2020, demonstrating the financial risk involved.
Legal Defense Costs
Coverage for legal defense costs is a primary benefit of an individual policy. The insurance provides funds for attorney fees, court filing fees, and expert witnesses, even if the claim is dismissed or found baseless. These defense costs are often provided outside the policy’s liability limit, meaning they do not deplete the amount available for a potential settlement or judgment. Since attorney fees can quickly accumulate, this coverage prevents financial hardship during litigation.
Settlements and Judgments
If a claim results in a finding of liability or an agreement to settle, the policy covers the financial payout up to its limits. This protection shields the nurse’s personal assets, such as savings, wages, and home equity, from being used to satisfy the financial obligation. The insurance company manages the negotiation and payment of the indemnity, ensuring the nurse is not personally responsible for the financial burden of a liability award.
Coverage for Licensing Board Actions
A key benefit often included in individual policies is coverage for legal representation during investigations or disciplinary actions initiated by a state licensing board. Complaints, which can be filed by a patient, colleague, or employer, are common and can jeopardize a nurse’s license. Employer policies rarely cover these administrative defense costs. Individual policies typically provide a specific amount of coverage, often up to $25,000, for legal fees associated with these non-malpractice matters. The average cost of a nurse license protection matter was over $5,300 in 2020, making this a frequent and costly risk.
HIPAA Violation Defense
Many individual professional liability policies offer coverage for the defense of civil claims related to violations of the Health Insurance Portability and Accountability Act (HIPAA). These privacy breach claims can result in fines and legal expenses separate from a traditional malpractice lawsuit. Coverage is typically offered up to a specified sublimit, such as $25,000, to cover the costs of legal defense for an alleged breach of patient information privacy. This protection recognizes the increasing liability nurses face related to data security and patient confidentiality.
Practical Considerations for Purchasing a Policy
When acquiring an individual policy, nurses must consider the two main types of coverage forms available: claims-made and occurrence. An occurrence policy covers incidents that occur while the policy is active, regardless of when the claim is reported, even if the policy has since expired. This form of coverage is generally more expensive initially because it offers permanent protection for the covered period.
A claims-made policy covers an incident only if both the incident and the resulting claim are reported while the policy is in force. If the nurse cancels a claims-made policy, they must purchase a separate extended reporting endorsement, known as “tail coverage,” to cover claims that may arise later from past incidents. The cost of an individual professional liability policy for staff nurses is relatively low, typically averaging under $100 annually. Costs vary based on specialty, state, and desired coverage limits.