There are two main types of malpractice coverage available to medical professionals: Medical Defence Organisation (MDO) coverage and medical malpractice insurance.

MDOs are mutual non-profit organisations that provide indemnity policies rather than insurance. These policies are offered on an occurrence basis, meaning they respond based on the treatment date rather than the date on which matters escalate. MDO policies are discretionary, meaning the MDO can choose not to pay a claim. Despite being discretionary, these policies are generally more expensive than insurance due to the breadth of the coverage. Being mutual and owned by the members, big claims can affect all the members' premiums as these pay for the claims.

On the other hand, medical malpractice insurance is a type of insurance that is contractually bound to guarantee coverage by law as long as the policy terms and conditions have been complied with. Insurers and brokers are FCA-regulated, which provides greater financial security that a claim will be paid. Medical malpractice insurance policies are on a claims-made basis, meaning they only cover claims made during the term of the policy. These policies are generally cheaper as premiums are not subject to large claims by other policyholders but are relative to the risk. Run-off cover is required when you retire but may be built into the policy.

Dr. Smith, a general practitioner, has been practising for several years. One day, Dr. Smith prescribes a medication to a patient without fully reviewing the patient's medical history. As a result, the patient suffers an adverse reaction to the medication and requires hospitalisation.

The patient decides to sue Dr. Smith for malpractice, claiming that he was negligent in prescribing the medication without considering the patient's medical history. If the patient wins the case, Dr. Smith will face paying the patient’s damages and legal fees, as well as his own legal fees.

Suppose Dr. Smith has medical malpractice cover in place. In that case, his insurance company will provide him with legal representation and cover the costs of the claim, including any damages that may be awarded to the patient.

If Dr. Smith has MDO coverage, the MDO may choose not to indemnify a claim, leaving Dr. Smith personally liable for the costs of the claim, which would include the patient’s damages and legal costs if the patient wins.