Does Professional Liability Insurance Exist?
During the “malpractice” crisis in the mid-1970s, it became apparent that professional liability was not an insurable risk, as the payouts could not be actuarially predicted in an age of runaway litigation and escalating awards. As physician-owned companies (“bedpan mutuals”) arose, coverage shifted from “occurrence” the standard form of insurance to the newly introduced “claims-made” policies. Like Medicare and Social Security, claims-made policies are a pay-as-you-go system. Whenever obligations rise (or perhaps as investment income decreases), premiums escalate and doctors are trapped. The instant they stop paying, they are, in the absence of tail or nose coverage, uninsured for all prior acts even during times that they were paying enormous premiums. The public is probably not aware of this situation (and would find it bizarre). But the trial bar understands very well. It can guard against a doctor simply dropping coverage and leaving a state such as Illinois, which has unaffordabl
