What is the purpose of professional liability insurance in the medical field?

Professional liability of any sort is intended to afford protection for the named insured's errors or omissions while conducting the business or profession in which he/she/it is engaged.

Coverage assumes that the claim comes within the scope of the policy, that the policy is in force at the time of the claim or when the wrongful act allegedly occurred (depending upon whether it is an "occurrence" policy or a "claims made" policy), that the claim is timely reported, and that there are no other coverage defenses.

The coverage afforded is generally twofold, similar to other liability policies:

1. The payment of attorney's fees for the defense of those insured under the policy. The insurer generally has the right to select the defense attorneys and to "control the defense", including, making the decision to settle or to litigate the case. Some policies have a "consent to settle" provision which allows the insured some say in the settlement decision. In all events, the insured has an obligation to cooperate with the insurer and the attorneys in the conduct of the defense.

2. To indemnify the insured for damages for which he/she/it is found legally liable, including the payment of a settlement negotiated by the insurer. Note, though, that the terms of the policy may provide for a liability deductible, so that the insured may have to contribute toward the damages as provided.