Coverage for Medical Directors: Understanding Your Malpractice Risks

As the American healthcare delivery system has increased in complexity, the role and responsibilities of the medical director has expanded to include both clinical oversight and administrative leadership. Medical directors are accountable not only for the care provided at the organization but also for its regulatory compliance as well as risk management and clinical policies. These duties create professional liability risks that standard malpractice insurance doesn’t fully cover. Working with an agent who specializes in medical malpractice insurance and understands the unique exposures associated with medical directorship is essential to acquiring appropriate coverage, avoiding protection gaps and minimizing professional risk.

Key Areas of Liability Exposure for Medical Directors

Medical directors serve in a dual capacity as both provider and administrator, responsible for overseeing clinical protocols and care standards, hiring and credentialing providers, managing quality assurance, overseeing peer review, guaranteeing regulatory and legal compliance, managing resources, and working with governing boards and leadership teams.

Due to their hybrid role, medical directors can be sued for both adverse patient outcomes as well as administrative decisions. Courts and regulators often consider them responsible when systemic failures occur. As such, in addition to medical liability coverage, medical directors also require administrative liability coverage.

Medical directors face liability risks that exceed what traditional medical malpractice coverage typically indemnifies. In addition to standard medical liabilities, medical directors may be exposed to liability in the following areas:

• Vicarious Liability for Subordinates
• Failure to Uphold the Standard of Care
• Regulatory Violations
• Peer Review and Disciplinary Actions
• Corporate and Board Level Decisions

It’s important that medical directors have a thorough understanding of these risks to seek coverage that may mitigate the negative impact of legal action.

1. Vicarious Liability for Subordinates

A medical director may be held vicariously liable for the negligence of staff under their supervision, particularly if an institution’s policies for staff oversight are found to be inadequate. For example, failing to maintain a peer review system that identifies incompetent physicians could result in liability for the medical director should a patient allege a lack of internal policies resulted in an adverse outcome.

2. Failure to Uphold the Standard of Care

Even when they have had no direct contact with a patient alleging negligence, medical directors can be named in a malpractice lawsuit if they establish, approve or fail to correct clinical policies that deviate from the standard of care. If adverse outcomes are alleged to have resulted from inadequate policies, medical directors can be targeted with litigation.

3. Regulatory Violations

Non-compliance with CMS regulations, state licensing requirements or accreditation standards can expose medical directors to professional risk that include failing to maintain credentialing files, disregarding required audits or mishandling documentation.

4. Peer Review and Disciplinary Actions

Managing peer review and disciplinary actions is a core duty of the medical director, but the responsibility carries its own unique risks. If a provider alleges that they were wrongfully disciplined or terminated based on a medical director’s recommendation, the director can be sued for defamation, disruption of contractual relationships or retaliation.

5. Corporate and Board-Level Decisions

Medical directors who serve on hospital or clinic boards can be held personally accountable under corporate law for breach of fiduciary duty, mismanagement or failure to act in the best interest of the organization.

What to Look for in Malpractice Insurance for Medical Directors

Most medical professionals carry standard malpractice insurance indemnifying direct patient care. However, these standard policies don’t include coverage for administrative decisions or omissions, corporate governance responsibilities, employment practices or regulatory violations, as well as peer review and credentialing activities. This leaves gaps in protection for medical directors and requires additional administrative liability coverage.

For complete protection, medical directors need specialized coverage designed for their distinct responsibilities. When seeking malpractice insurance, medical directors should be mindful of particular types of coverage that can help mitigate risk and the potential that a facility’s shared coverage may not provide sufficient protection. Some additional medical liability insurance protections that medical directors may seek include:

• Medical Director Endorsements
• Directors and Officers Insurance (D&O Insurance)
• Employment Practices Liability Insurance (EPLI)

1. Medical Director Endorsements

Certain malpractice policies include endorsements developed for medical directors, extending coverage to non-clinical duties like policy formulation, provider credentialing and administrative oversight. These endorsements are usually added to a physician’s existing professional liability policy for an added premium.

2. Separate Directors & Officers (D&O) Insurance

When a medical director serves on a board or holds fiduciary duties, D&O insurance will protect against claims involving mismanagement, breaches of duty or flawed board decisions. While many organizations furnish D&O coverage for their leadership team, it’s incumbent on the medical director to determine whether its limits and scope are broad enough. If they are not, an individual D&O policy

3. Employment Practices Liability Insurance (EPLI)

If the role includes responsibilities such as hiring, terminating or disciplining staff, EPLI coverage can help protect against claims of wrongful termination, discrimination or harassment.

A Note on Entity or Shared Coverage

Medical directors are sometimes included under the facility’s malpractice or general liability policy. However, shared coverage may involve sub-limits or create disputes in legal defense. Directors should make certain that the entity’s policies provide adequate limits and names them as an individual insured.

In today’s intricate healthcare delivery system, medical directors assume a combination of clinical and administrative responsibilities that expose them to a broad spectrum of liability risks. Standard malpractice insurance fails to address all these exposures, creating coverage gaps. To shield these risks, medical directors need broad coverage designed for their position. By recognizing their risk exposures and working with an agent experienced in acquiring appropriate malpractice insurance for medical directors, medical directors can focus on leading their organization, not their potential liabilities.

Contact us today to get free Medical Malpractice Insurance quotes, discuss coverage options, and find the best rates to protect your practice and your wallet.