Physical therapy malpractice insurance might feel like just another “must get” checklist item when you’re starting a new job or opening your own PT clinic. But the nuances of the actual policy — and what it covers or doesn’t cover — can be easily overlooked. Understandably so. Whether you’re launching your career or your business, you likely have a gazillion other things on your mind.
Do you need malpractice insurance? Sometimes the decision is made for you, and you’re told physical therapy malpractice insurance is required to have your own business or to join a team. Easy. Now you just need to look for the best coverage that meets your needs. But sometimes you decide you want your own policy, which might be a supplemental policy you have in addition to the one your employer provides. That can be a more personal decision that helps you sleep extra well at night.
But first things first. No matter the path you’re on, this guide will help dig into what malpractice insurance protects, how it works, why you might want a supplemental policy, and when you can lean on a malpractice insurance policy. Here’s all your physical therapy malpractice insurance questions answered in one place.
What Is Malpractice Insurance for Physical Therapists?
Malpractice insurance (also known as professional liability insurance) protects physical therapists if someone claims they were negligent or made a mistake that caused bodily harm. Malpractice insurance can pay legal fees to help defend PTs if an individual or group makes a claim against you, or if a licensing board files an action against you — even if the claim is frivolous, lacks evidence, or does not have a valid legal argument. A malpractice policy can also provide the funds necessary to pay a judgment or settlement to resolve the case.
Understanding a Malpractice Insurance Policy
You may encounter unfamiliar language when shopping for professional liability insurance for physical therapists. Here is a list of terms you should know and research when choosing your policy:
- Certificate of insurance (COI): A document issued by the insurance company describing coverage and summarizing the most important details of a policy, including the effective dates. Some employers will ask to see your COI before you start working.
- Claims-made policy: Claims-made policies cover incidents only if they happened and the claim was filed during the policy period.
Learn more about claims made policies vs. occurrence policies
- Defense costs: This can include fees and expenses paid to your lawyer, court filing fees, and money paid to expert witnesses. It is separate from the money that might need to be paid to the claimant/plaintiff, whether as a settlement or court judgment.
- Hammer or forced arbitration clause: You might also hear this called a settlement cap provision or consent to settlement provision. This means if the lawyers provided by your insurance company recommend you settle your case -- but you insist on going to trial – a hammer clause would make you responsible for paying the plaintiff out of pocket if the judgment is more than what it could have settled for.
- Limits of liability: The cap on what the insurance company will pay. Limits of liability have two components — how much the policy will cover per claim (or per occurrence) and the maximum it will cover each year (known as the aggregate limit). You also might hear limits of liability mentioned when discussing whether defense costs are “inside the limits” or “outside the limits” of the policy. If defense costs are inside the limits of liability, the money paid to the lawyers will reduce the amount available to pay a settlement or judgment.
- Occurrence policy: Occurrence policies cover incidents that happened during the policy period, no matter when the claim is filed. (See an example of how this works below.)
- Tail coverage: Extends the coverage of a claims-made policy so that claims that come in after the policy expires would still be eligible to be covered. You would likely buy tail coverage if you were leaving a job and had a claims-made policy with that employer.
Why Should Physical Therapists Have Malpractice Insurance?
Most states will require PTs to have a malpractice policy if they have their own practice, work as a contractor, or run a PT concierge business. The reasoning is simple: No matter how hard you work or how good your intentions are, a patient may claim you caused them harm or were negligent in their care. Even if the claim doesn’t have merit, it could still cost time and money to defend yourself against it. And enduring these expenses could be enough to put you out of business.
Just think how much lawyers cost. Legal fees are the very least you can expect to pay if a lawsuit is filed against you. An actual settlement or judgment could cost tens to hundreds of thousands of dollars -- or sometimes more. But an insurance policy could cover this, plus reimburse you for extra expenses, like lost wages from missing work while giving testimony.
Why Would a PT Want Supplemental Coverage?
Even if an individual PT is covered under their employer’s malpractice insurance, they may opt to purchase a policy on their own. An individual supplemental policy can protect a contract-based therapist or permanent employee in a number of ways, including:
- Provide separate legal counsel (which comes in handy if you disagree with the rest of the team named in the claim).
- Assist during board action disputes (employer policies often don’t cover this).
- Access extra limits of liability (which helps if your whole team is named in a claim and you need more funds to support your defense or settlement).
Another benefit of a supplemental insurance policy is that it often costs a lot less than a primary policy. The employer’s policy would act as your primary policy and would be leaned on first. However, if you wanted to have your own legal team or felt the primary policy didn’t have enough limits of liability to pay the settlement, or you have a board action, you would tap into your supplemental.
The Most Common Types of Claims Made Against Physical Therapists
While being sued isn’t as common for PTs as it is for other healthcare professionals, PTs can and do get sued. In the Journal of Allied Health, Robert Sandstrom found there was an average of 48 malpractice reports against physical therapists per year in the U.S. between 1991 to 2001.
Here are the top five most common reasons for a malpractice claim against a PT, according to data from 2011 to 2015 from the Federation of State Boards of Physical Therapy:
- Improper treatment management (22%)
- Improper performance using therapeutic exercise (20%)
- Failure to supervise or monitor (19%)
- Improper performance using a biophysical agent (such as the TENS unit and hot packs) (17%)
- Improper performance of manual therapy (9%)
Do I Need Malpractice Insurance If I Work in a Clinic?
You may not be required to have malpractice insurance if you work as an employee of a clinic, according to Michael Senderovich, a licensed insurance broker in California. “The clinic’s malpractice [policy] may provide coverage for a PT,” says Senderovich. But it’s helpful to ask questions about the clinic’s insurance — for example, is it a claims-made or occurrence policy? What are the available limits of liability? Is defense provided inside or outside the limits of liability? This information will help you determine whether having your own supplemental policy is right for you.
It’s different if you have your own physical therapy practice or work as a contractor with a clinic. There, Senderovich recommends you should “definitely carry your own insurance.”
Read a real story of an OT contractor who was sued for negligence
Do I Need Malpractice Insurance If I’m Still a Physical Therapy Student?
Some schools’ PT programs insure you, but others require you to have your own policy before you start clinicals. Or, you might be covered under the PT group or clinic where you do your clinical rotation. It is important to double - check with the clinic’s office manager or owner about whether you are insured during your training and about any restrictions. “Students can be tricky, mostly due to what they can actually do with the patient,” says Senderovich. “There can be major coverage gaps if the [program’s] policy is not written correctly.”
Having your own student policy often costs very little money. If you’re ever worried or doubtful about having sufficient coverage, it might provide peace of mind to get your own policy.
How Does Malpractice Insurance Work?
Let’s look at an example to explain more about how malpractice insurance works.
Suppose Sam is a physical therapist. He works as an independent contractor for a physical therapy clinic and isn’t covered under the clinic’s malpractice policy. Sam buys his own occurrence policy with $1 million/$3 million limits of liability, no deductible and legal counsel is “outside the limits of liability.” This policy provides $1 million of coverage per occurrence (or per claim) and has a $3 million cap on coverage per year.
One day a patient of Sam’s alleges he didn’t manage her treatment properly, causing her injury. She files a lawsuit. Sam connects with his malpractice insurance company and submits the claim. The insurance company is then likely to assign a claims professional to help Sam manage the issue. In Sam’s case, since there is a lawsuit filed, an attorney would also be provided.
The lawyer reviews the claim and confers with Sam and the plaintiff’s legal team. They propose a $200,000 settlement, which Sam agrees to. Because the policy offered legal counsel “outside the limits of liability” and the settlement sum is less than the $1 million limit per claim (with no deductible), Sam does not have to pay anything out of his own pocket. He also has $2.8 million in limits of liability (up to $1 million for any one claim) remaining for the policy year.
Now say that Sam gets a new job and the employer has malpractice insurance for the entire team, so he allows his old policy to expire. But one day he gets a phone call that a former patient claims that long ago Sam had planned an improper course of treatment -- which has now caused future injuries. Sam had been treating this patient while he had his old occurrence policy, so he contacted that insurance company to seek support. Because Sam’s old insurance policy was an occurrence policy, and because the claim arose out of treatment given during the policy period, the insurer is able to assist him with the claim and settlement. If Sam’s old policy had been a claims-made policy, however, the claim would be outside the policy’s coverage because Sam did not purchase tail coverage.
How Much Does Physical Therapy Malpractice Insurance Cost?
The cost of physical therapy malpractice insurance varies. At Berxi, a supplemental policy might cost around $128 per year, while a primary policy starts at around $386. These would both offer you $1 million/$3 million in limits of liability. However, costs can “range dramatically from state to state and city to city,” notes Senderovich. He explains that location, type of services, revenue, experience, claims history, and continuity of coverage are some of the biggest factors influencing the cost.
For example, “instead of working at a physical therapy office, [a therapist] could be a mobile PT that’s working with high - level athletes,” says Senderovich. “So, that could be [a] more expensive [policy].”
What Does Physical Therapy Malpractice Insurance Cover?
No two policies are the same, and physical therapy malpractice insurance coverage can vary from one policy to the next. However, the Insurance Information Institute notes that most policies cover:
- Legal defense fees and court costs: Whether trying to settle out of court or in court, lawyers will cost money.
- Arbitration expenses: This includes any paid experts your defense needs, and any travel or demonstration tools required to fight your case.
- Settlement costs: If you or the court determine the claimant should be paid, this is called a “settlement.” It is typically made up of:
- Punitive and compensatory damages: the amount paid to the claimant to make up for lost work, etc.
- Medical damages: the cost of the expenses needed to fix the medical problem.
Is Physical Therapy Malpractice Insurance Worth It?
According to Senderovich, physical therapy malpractice insurance is always worth it if you work as a contractor or you run your own physical therapy practice. In these situations, Senderovich recommends that you “definitely carry your own insurance.”
If you are covered under your employer’s policy, you should still consider buying supplemental coverage. Even the fairest employers have their own interests to consider when a malpractice suit is filed. The best legal outcome for your employer may not be the same as the best outcome for you. Having your own insurance protects you in important ways that your employer’s policy may not.
Consider a policy if you:
- Run your own clinic
- Work as a contractor
- Provide services outside of your regular employment
- Want additional financial protection against claims
- Want your own legal team with control over consenting to any settlement
- Want coverage in case you are named in a board action
What to Look for in a Physical Therapist Malpractice Insurance Provider
Choosing the right malpractice insurance company is an important decision. When comparing options for physical therapy malpractice insurance, here are things to look into:
- Convenient payment plans and options: Some insurance providers offer annual, quarterly, or monthly payments with the possibility of a single payment discount or automatic monthly billing.
- Consent to settle clause. You will likely want to help decide if your claim goes to court or gets settled.
- Coverage extensions for additional protection: Malpractice insurance typically covers errors, omissions, or negligence while providing professional services, but optional coverages (such as general liability) can increase your protection.
- Financially stable underwriting company: The underwriting company is the insurer who backs your policy. Insurance companies’ financial strength is scored by independent reviewers, such as JD Power or A.M. Best. Strength ratings are indicative of an insurer's ability to pay claims. Choose a company that has solid financial ratings to minimize your risk of being left high and dry (A++ ratings are ideal).
- Flexible policy limits: Some policies have fixed limits of liability. Look for a company that will let you choose your limits, so you can make sure you’re getting enough protection -- and only pay for what you feel you need.
- Legal defense costs outside the limits of liability. If legal fees are paid from your limits of liability, it reduces how much money would be available if you had to pay a settlement. Look for the term “outside the limits” when searching for your policy.
- Low deductible amounts: Deductible amounts can vary. A higher deductible generally means lower premiums, but a lower deductible means fewer out-of-pocket expenses if you need to use your coverage.
- Online access to manage your policy: Some providers give you access to online account management tools and resources where you can view policy details, pay bills, get certificates of insurance, and more.
- Superior customer service: Choose a provider that has regular customer service hours that fit your schedule. It can be even more helpful if they have multiple channels to contact customer service, such as online chat, email or telephone.
- Worldwide coverage: You probably want your insurance to cover you wherever you are licensed, not just your main state of practice.
You have the important job of helping patients relieve pain, recover from injuries and surgery, and manage chronic conditions. The conscientiousness and diligence you bring to your work are essential qualities to have on your side for avoiding malpractice claims.
But mistakes can happen. Or people can claim they happened. It’s always important you have an insurance policy you feel comfortable with — from a company you trust. If you ever need to lean on them, you want to feel good about who you’ll be working with.
If you have any questions about Berxi or the protection we provide physical therapists, use these resources below:
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