Professional Liability / Malpractice Insurance for Therapists & Counsellors

According to the American Psychological Association, 2% of counsellors face a malpractice lawsuit at some point during their careers. These lawsuits are expensive, and could easily cost up to $50,000 per case that is why understanding malpractice insurance for counsellor is important. More and more people turning towards professionals for help, this number has likely gone up significantly by now. 

With the growing importance of mental health services, the risk of malpractice claims against counsellors has also increased, and thus, so has the need for malpractice insurance. 

What is Malpractice Insurance?

Malpractice insurance, also called professional liability insurance, is a form of coverage that protects mental health professionals from legal claims or financial consequences stemming from error, negligence or misconduct. 

It protects professionals from the costs of lawsuits (which we discussed earlier could shoot really high), including the fees, settlements, legal costs and judgments. 

Some of the more common types of malpractice claims for counseling professionals revolve around sexual misconduct, neglecting duty to warn or report harm to the client or those around them, a misdiagnosis, improper treatment or breaching confidentiality. 

The risk of a therapist facing a malpractice lawsuit depends on the type of clients a mental health professional treats, their location, and many other factors. The legal climate in some states is more favourable to malpractice claims than in others

But don’t worry - just an accusation won’t immediately take you to court. To win a malpractice case, the accusing party has to prove four elements: 

• Duty of care - they must prove that you owed them a duty of care, i.e. you had the legal obligation to act in a competent and ethical manner. 

• Breach of duty - they must prove that you failed to act in a way that a reasonable professional would have acted in the same situation.

• Causation -  they must prove that the breach of duty resulted in harm which would not have occurred otherwise. 

• Damages - they must prove the damage caused. 

But regardless of whether this is a case you can win or lose, the price tag attached to a lawsuit is pretty intense - and that’s why malpractice insurance becomes so important. 

How Does Malpractice Insurance Protect Counsellors?

So, how exactly does malpractice insurance protect you from a lawsuit? Well, like any other insurance policy, the aim is to take the financial burden off your shoulders.

Defence Costs

Malpractice insurance typically includes defense coverage for some of the more significant expenses. This includes the legal expenses of hiring an attorney, and preparing a strong defence (which can be quite costly!). Healthcare professionals don’t have to pay for any of these things out of pocket if they have an financial protection.

Settlements & Judgments

In case the lawsuit leads to a settlement or judgement, malpractice insurance also covers these costs. For example, if you end up having to compensate the plaintiff, or make a court-ordered payment, insurance will take care of this for you. Having insurance keeps you from being personally burdened by these obligations. 

Expert Witness Fees

Many cases require expert witnesses to stand and speak in your defence. These experts can be costly to retain, and malpractice insurance usually covers the cost associated with hiring them. 

Costs of Defending Against Disciplinary Actions

If you end up facing disciplinary action by boards or organisations, the insurance policy can also extend its protection here and cover these expenses. 

Factors Affecting the Cost of Malpractice Insurance for Counsellors

The cost of malpractice insurance for counsellors and mental health professionals can vary significantly. 

Most policies will usually offer coverage ranging from $100,000 to $300,000 (the maximum amount companies will pay per claim within the policy period), and $1 million to $3 million (the max amount companies will pay for all claims within the policy period). 

But this doesn’t mean this is a standard across the board. There is no one set amount, and the cost of insurance can fluctuate greatly depending on certain factors. 

Type of Practice

What kind of counselling practice you run plays a pretty significant role here. Insurance costs depend on risk profiles, and this is also true here. For example, individual therapy and group therapy are different settings, and can increase or decrease the risk profile. More complex and high-risk practices have higher premiums.

Years of Experience

The level of experience you have as a professional in the field impacts your risk profile, and thus your cost. Newly licensed counsellors with limited experience usually pay higher premiums, since the likelihood of a malpractice case is much higher. In comparison, seasoned professionals have lower premiums. 

Location

Geography also plays a role! Some regions have higher malpractice premiums because of the local economics and laws. As an example, urban areas are more densely populated, and thus have higher insurance costs. 

Specialty Areas

For mental health professionals with speciality areas, the specialty in question can affect insurance cost. Once again, the risk profile of these areas differs - for example, addiction counselling is quite different from child psychology - so insurance premiums also go up and down accordingly. 

The Policy

Of course, the details of the policy and the company you’re getting it from can also affect the overall cost. If you’re getting more coverage, and the amount you’re willing to pay is lower, the cost of your malpractice insurance will be much higher, and vice versa. 

Claims History

If you’ve made any claims in the past, you’re automatically a higher risk for the insurance company than a counsellor with fewer or no claims in the past. This also affects the cost of your insurance. 

Choosing the Right Malpractice Insurance Policy

When picking out a malpractice insurance policy for yourself, you have to be careful to find one that actually works for you. Not every policy covers every aspect of your role. If you pick an inadequate policy, your wallet may take a hit if you do end up in a malpractice lawsuit. 

There are a few things to watch out for when choosing the best policy. 

Coverage Limits

Look at the coverage limits the policy offers. These determine the maximum amount the company will pay if a claim pops up. Make sure this aligns with your potential liability.

Deductibles

There are also typically some deductibles associated with policies. These represent the amount you have to pay out of pocket before the insurance takes over. Consider your finances and budget for deductibles before you choose the policy. Deductible amounts really vary, so this depends a lot on the policy and your own finances. 

Exclusions

Don’t forget to look at exclusions! These are specific situations or types of claims that the insurance doesn’t cover. Knowing these helps avoid surprises when claims come up. You want to be sure that the exclusions don’t compromise your practice.

Claims History 

The company will look into your claims history to assess your risk profile, but you should be doing the same. Insurers with a good track record of handling claims fairly and efficiently will likely be better at handling yours as well if the need arises.

Provider Reputation

Find an insurance provider who has already worked with counsellors, psychologists and mental health professionals before. Their understanding of your profession can help quite a bit and may even cover some things you wouldn’t have thought of on your own.

Reducing the Risk of Malpractice Claims

No one’s free of error, so there’s always the risk of a malpractice claim, even if it stems from a simple mistake. But there are proactive steps you can take to minimise the risk as much as possible.

Good Documentation

There’s no way to emphasise the importance of good documentation. Every session, including assessments, treatment plans and progress notes should be documented and recorded. Clear and comprehensive records can be evidence about the kind of care provided during therapy, and an important part of defending against malpractice claims.

Stay On Top of Standards

Industry standards are changing all the time. Staying informed about any new developments and best practices helps you provide the best possible care, and reduce the likelihood of any malpractice claims. 

Get Informed Consent

Carrying professional liability or malpractice insurance is highly recommended for mental health professionals as its provides financial security to them. This type of insurance provides coverage in the event of a lawsuit brought by a client alleging errors or omissions leading to harm or injury, such as improper treatment or a breach of duty.

Lawsuits can arise even when therapists follow standard practices and act in good faith. A malpractice lawsuit can be financially and reputationally devastating for an individual practitioner. Having insurance allows the provider’s policy to pay legal fees and any settlement or award costs, up to the policy limits.