What About Liability Coverage for Medical Directors?

Serving as a medical director can come with liability exposures that extend beyond patient care. Here’s what physicians should know about malpractice coverage, facility insurance, and contractual obligations to protect themselves within the role.

Serving as a medical director can create liability exposures that differ from those associated with traditional patient care. Depending on the role, a physician may be responsible for clinical oversight, policy development, quality management, staff supervision, or other administrative functions. The insurance coverage available for those activities may also differ depending on who employs the physician, which entity is named on the policy, and what responsibilities are assumed under the medical director agreement.

Coverage for medical directors under typical malpractice (professional liability) policies can be challenging because the role often blends responsibilities that are not usually covered. For example, a physician's standard malpractice policy provides coverage for patient care, but when it comes to administrative duties, it only covers those performed for the entity named in the policy and not for duties assumed under a contract.

Let’s take a closer look at how liability comes into play for medical directors and how having a policy designed for that role can close gaps in liability for your facility.

Does Malpractice Insurance Cover Medical Directors?

In short, it really depends on the services being performed, the policy language, and the entity for which the physician is performing those services.

A physician's professional liability policy is generally designed to cover claims arising from professional medical services. However, medical director responsibilities can extend beyond direct patient care to include administrative, supervisory, and organizational functions. Those activities may not be covered under an individual physician malpractice policy.

A medical director often:

• Provides medical oversight, clinical leadership, and supervision
• Develops, reviews, and enforces clinical policies/protocols
• May oversee quality assurance, credentialing, or utilization review
• Participates in quality improvement and patient safety initiatives
• Guides clinical staffing

Gray Areas of Medical Director Coverage

As you can see, not all services provided fall neatly into one category or the other. Generally, if a physician sees a patient or prescribes treatment for a specific patient, that is patient care and not administrative services. When a physician is reviewing patient charts but not making recommendations for a specific patient, that activity would not be patient care.

The key issue for insurance is whether the work is considered professional medical services/patient care or administrative/management services. The exact responsibilities should be clearly defined in any medical director agreement, because the scope of services can affect both the physician's liability exposure and the insurance coverage available for those services.

There may be coverage if the administrative acts are provided for the named insured on the policy, but when assumed under contract for another facility, they are generally not. This is why physicians should review both their professional liability policy and the medical director agreement before accepting the role.

Coverage Under a Physician Malpractice Policy

Covered Activities 

• Direct patient care
• Clinical decisions made in the patient-provider relationship
• Administrative acts as outlined above, but only when performed for the entity named on the policy

Often NOT Covered or Limited

(Sometimes classified as administrative acts or business/executive liability)

• Purely administrative or executive functions
• Corporate/board decisions
• Employment or staffing decisions
• Regulatory compliance failures

Medical Director Contract and Insurance Red Flags

Before signing a medical director agreement, physicians should look closely at provisions that could expand their liability beyond the services they actually perform. Here are a few major red flags to watch out for:

Broad Indemnification Provisions
A contract may require the physician to indemnify the facility for certain claims or losses. Physicians should understand exactly what they are agreeing to cover and whether their insurance policy responds to those obligations.

Contractual Liability Provisions
A physician's policy may not cover every liability assumed solely because of a contract. The distinction between liability arising from your professional services, services performed by others, and liability assumed under an agreement is important.

Unclear Scope of Services
A vague description of medical director responsibilities can create uncertainty about what the physician is expected to do and whether those activities are covered.

Supervision and Staffing Responsibilities
If the medical director is expected to supervise employees or contractors of another organization, the physician should confirm how that exposure is insured.

Compliance and Regulatory Obligations
Contracts that make the medical director responsible for broad regulatory or operational compliance may create exposure beyond traditional patient-care liability.

The Blurred Lines Around Medical Director Coverage

It’s important to remember that the facility’s policy is usually the primary coverage for medical director activities. A malpractice policy typically covers only liability arising from professional services rendered by the insured to a patient, NOT liability you assume via contract.

A physician professional liability policy is designed to cover the liability for patient care for the physicians or APPS on the policy. A facility policy is designed to cover the liability for the various people who work within the facility for both patient care along with clinical oversight and administrative duties.

The policy is written to include both employees of the facility and medical directors. Coverage under the facility policy for medical directors is limited to services performed on behalf of the facility and excludes activities conducted outside the medical director role, such as direct patient care.

Contract and Coverage Issues to Review

Medical director responsibilities can extend well beyond traditional patient care, and physicians should not assume that their existing malpractice policy automatically covers every aspect of the role. Before entering into a medical director agreement, review the scope of services, insurance requirements, indemnification provisions, and applicable policy exclusions.

We recommend confirmation of the following:

Insurance Questions

• Does your malpractice policy explicitly include medical director services?
• Is coverage limited to those services performed for the entity named on the policy?
• Are administrative acts excluded?
• If the services provided include supervision of another facility's employees, will your policy respond?

Facility Coverage

• Does the facility have coverage for contracted medical directors under its policy?
• What is covered?
• Are the services you provide covered under that policy?

Explore Standalone Policies for Medical Directors

Understanding who is responsible for each type of liability can help physicians avoid unexpected gaps in coverage. If coverage by the facility is not an option, standalone policies designed to pick up the exposure not covered elsewhere for medical directors do exist. Policies are priced based upon the scope of services provided.

For additional questions about medical director coverage or contracts that you have entered into, please do not hesitate to reach out to the underwriter on your account or email Cindy@lhatrustfunds.com for more information.