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What does it cost to defend a malpractice claim?

Gallagher Healthcare :: Industry Insights
By Brandon Rich | 2/26/2016

A question that comes up regularly is that of “defense” costs. Ask any person involved in an insurance claim that required a defense attorney how much the insurance company spent defending your case, and I doubt you will find anybody who knows know the true cost. This is important for a couple of reasons:

  • The cost of defending you in a claim could have an impact on your annual premium.

Insurance companies do not make this a complicated equation. They weigh up the premium they have collected against what they have paid out on your behalf. They have simple thresholds from there. If you exceed them, you can expect a rate increase. If you don’t, then you shouldn’t expect one.

  • The cost of defending you is important when approaching other carriers.

If the insurance company spent very little money defending you, the chances are the claim had no “teeth”. If they did spend a considerable amount, the claim was probably reasonable. Not making any indemnity payment, no matter what was spent defending you, always looks better, and makes you or your organization more marketable.

The average cost of defending a malpractice claim is approximately $30,000. This includes the attorney’s fees, expert witness costs, and reimbursement fees (if eligible). This average comes from a couple of different national insurance carriers specializing in defending malpractice insurance cases. The amount will vary slightly, according to the venue in which it is set and whether the case is expert driven. Lastly, it is important to understand what is being spent when you have a claim. It is important to analyze the numbers and be well versed, or have a professional helping you that is well versed in this area. Understanding these costs will allow you to better understand your annual premium.

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