Frequently Asked Question:

What’s Included in Defense Costs vs. Indemnity Limits? 

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Medical Malpractice

The Short Answer

In malpractice and other liability policies, indemnity is the amount paid to resolve a claim (settlements or judgments), while defense costs are the legal fees and expenses to investigate and defend you. How these interact with your limits — “inside” vs. “outside” the limit — has a major impact on how much protection you really have.

The Full Answer

Defense inside the limits means attorney fees, experts, and defense expenses erode your liability limit, leaving less available for settlement or judgment if a case is costly to defend. 

Defense outside the limits means legal expenses are paid in addition to your liability limit, providing stronger protection in high-severity or complex litigation. 

Understanding covered vs. uncovered costs is critical. Policies may exclude certain regulatory fines, punitive damages, or non-malpractice legal issues (criminal matters, some EMTALA or HIPAA penalties), so knowing exactly what is treated as defense vs. indemnity matters. 

How Liberty optimizes your coverage structure: Liberty reviews your policy forms to clarify how defense is handled, identifies gaps, and negotiates structures — such as defense outside limits, consent-to-settle language, and separate sublimits — that fit your risk profile and board’s risk tolerance.

Related Questions

If you’re covered under an employer’s policy, you may not need one. Many NPs and PAs buy an individual policy anyway for coverage outside work and protection the employer’s policy doesn’t give.

Only a few states require it by statute. In practice, nearly every hospital, health system and many payers require it before you can work or bill.

Usually, while you’re employed there and acting within your job duties. It typically does not cover moonlighting, volunteer work, or claims filed after you leave.

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