When a physician gives treatment to a patient, it's difficult to predict whether or not the treatment will have a positive effect on the patient. If the treatment provided by the Physician fails due to negligence or if he/she deviates from the standard procedures then the career of the Physician will be at risk when the patient takes legal action. All Physicians are bound to stick to the standards established in the medical community. When a Physician or a doctor, dentist, therapist, pharmacist or nurse fails to provide proper treatment, then it is termed as medical malpractice. The debate among Physicians is whether or not to take Physician malpractice insurance because of the huge cost involved.

When a Physician purchases Physician malpractice insurance, the payment liability gets transferred to the insurance company or the insurer. If the Physician or the insured is sued for malpractice, the insurance company does a thorough investigation so that any frivolous claims made against the insured are ruled out. In case, the medical malpractice claim is proven then the insurance company will compensate the patient or his / her legal representative for the damage or injury caused. Normally the insurance company's compensation is based on the coverage limit purchased by the health care provider. Apart from that even the legal fee is taken care by the malpractice insurance company. Thus having Physician malpractice insurance will be beneficial to the Physician when they have to spend hundreds and thousands of dollars when a lawsuit is filed against them for medical malpractice.

Due to the skyrocketing prices of Physician malpractice insurance premiums and the fear of being sued for malpractice, medical practitioners provide treatment out of fear rather than providing treatment based on the patient's health and care, which is termed as 'defensive treatment'. The patients have to undergo unnecessary tests and procedures so that the Physician can defend themselves against any malpractice claims made in future. Due to the increasing cost of Physician malpractice insurance and huge premium amounts, Physicians hesitate to buy it. Not having this kind of coverage drives the Physicians to quit their practice, as they fear facing a lawsuit. Due to malpractice crisis, many states have adopted retort forms so that the premium rate is reduced.

The Damages caused to a patient as a result of medical malpractice can be compensatory or punitive. Compensatory damages can be further classified as economic and non-economic damages. Financial loss includes expenses borne by the patient for undergoing treatment and non-economic damages refer to physical damage such as a patient losing his or her vision due to negligent treatment. The law in most of the states has set a limit for the compensation that is awarded to the plaintiff and it also regulates the premium amount set by insurance companies so that the Physician who purchase Physician malpractice insurance do not have to pay an unfair amount.