What Happens to Your Malpractice Insurance If Your Carrier Goes Out of Business

You’ve been paying your malpractice premium every year. You keep your policy current. You don’t think much about it because that’s sort of the point: it’s supposed to be one less thing to worry about. Then you get an email from your carrier, or you hear from a colleague, or you see a thread blowing up in a Facebook group. Your insurance company is in financial trouble. They might be shutting down. And suddenly, the thing that was supposed to protect you is the thing you’re worried about. 

This isn’t a hypothetical scenario, and it isn’t new. In April 2026, a malpractice carrier in New Jersey announced that it is insolvent and may be placed into liquidation within 30 days. Practitioners and their businesses who had been paying premiums to that carrier for years are now trying to figure out whether their coverage still means anything, whether they’re exposed, and what they’re supposed to do next. 

They’re not the first to go through this. In 2019, a Texas-based malpractice carrier that covered physicians and PAs was placed into liquidation after regulators determined it lacked sufficient reserves. In 2017, a risk retention group based in South Carolina that insured NPs and PAs in multiple states, including New York, was liquidated after years of failing to maintain adequate capital. That RRG’s policyholders discovered that because it was a risk retention group, the state guaranty fund did not apply. They were left to defend themselves with no carrier behind them. 

If that’s you right now, or if you just want to make sure you never end up in that position, this is what you need to know. 

Am I Still Covered If My Insurance Company Becomes Insolvent? 

The short answer is: probably, but not in the way you’d expect. And it depends on three things: the type of policy you have, the type of carrier that issued it, and whether that carrier was regulated by your state. 

If you had an occurrence-based policy, you’re in a better position. Occurrence coverage responds to any incident that happened while your policy was active, no matter when the claim shows up. If you treated a patient in 2024 and someone files a claim in 2027, your 2024 policy is the one that responds. That protection doesn’t evaporate when the carrier has financial problems. 

What does change is who pays. When a traditional, state-regulated admitted insurance company becomes insolvent, most states have a property-liability insurance guaranty association that steps in to handle eligible claims. Think of it as a safety net funded by the insurance industry. It exists specifically for situations like this. 

But there are important catches. 

First, most state guaranty funds cap payouts at $300,000 per claimant. If your original policy had limits of $1M/$3M, the guaranty fund isn’t going to cover the full amount. That gap between $300,000 and your original limits is real, and it matters. 

Second, state guaranty funds only apply to admitted carriers. There are two categories of carriers that fall outside this protection: 

Non-admitted (surplus lines) carriers are sometimes used for harder-to-place risks, including medical malpractice. They operate outside of the standard state insurance regulatory framework and are not backed by state guaranty funds. If your carrier was a surplus lines insurer and becomes insolvent, there is no state safety net. 

Risk retention groups (RRGs) are also not covered by state guaranty funds. When a South Carolina-based RRG that insured NPs and PAs was liquidated in 2017, policyholders in New York and other states had no guaranty fund protection whatsoever. A New York court noted that practitioners who had purchased coverage from that RRG “assumed the risk” by choosing discounted premiums from a carrier that explicitly warned on its own policy declarations that state guaranty funds were not available. Those practitioners were left to defend malpractice claims on their own. 

This is where the financial strength of your carrier matters more than anything else on the page. If your carrier isn’t backed by a state guaranty fund, then the carrier’s own financial reserves are the only thing standing between you and an undefended claim. 

If you had a claims-made policy, the situation is trickier on top of all of this. Claims-made coverage only responds if the claim is both made and reported while the policy is active. If the carrier is shutting down and your policy lapses, you could have no coverage for past incidents unless you have tail coverage (an extended reporting period) or your new carrier provides prior acts coverage with a retroactive date that matches your old policy. 

Most practitioners have no idea whether their carrier is admitted, non-admitted, or an RRG. If your carrier just became insolvent, this is the first thing to find out. 

My Carrier Sold Its Policies to Another Company. Am I Protected? 

Maybe. But probably not the way you think. 

When a carrier decides to leave a market, they sometimes enter into what’s called a “renewal rights agreement” with another company. That sounds like your policy got transferred to someone new. It didn’t. A renewal rights agreement just means the new company got the right to offer you a new policy when your old one came up for renewal. It’s an introduction, not a transfer. 

Your old carrier’s liabilities stayed with your old carrier. The new company didn’t buy the old company. They didn’t take over your existing coverage. They didn’t assume responsibility for any claims under your previous policy. If the old carrier is now insolvent, claims from incidents that happened under your old policy are still the old carrier’s problem, which means they fall under whatever guaranty protections (if any) are available. 

What this means practically: if you renewed with a new carrier through one of these agreements, your new coverage starts on the date of your new policy. Check what your retroactive date is. If it matches the retroactive date from your previous policy, claims from past incidents may be covered going forward. If the retroactive date was reset to the start of the new policy, you have a gap for anything that happened before that date. 

What Should I Do Right Now? 

If your carrier has just announced insolvency or you’ve heard they might be shutting down, there are a handful of things that need to happen quickly. This isn’t the time to wait and see. 

• Get written confirmation of your current policy status. Contact your carrier or your broker and ask for documentation showing whether your policy is still active, what type it is (occurrence or claims-made), what your retroactive date is, and what your effective dates are. Don’t rely on a phone call. Get it in writing. 

• Find out whether the state guaranty fund covers your carrier. If your carrier was a traditional admitted insurer, your state’s guaranty association likely applies, subject to the per-claimant cap. If it was a non-admitted (surplus lines) carrier or a risk retention group, it likely does not. Your state’s department of insurance can tell you. 

• Get new coverage in place immediately. Do not wait to see how the insolvency plays out. Your priority is to have active, valid professional liability coverage at all times. A gap, even a short one, can affect your hospital privileges, your ability to stay on insurance panels, and your employment. If you need to move quickly, CM&F Group offers individual policies for NPs, PAs, nurses, PTs, and counselors that can be quoted online in minutes with same-day effective dates. 

• If you had a claims-made policy, address your prior coverage. When switching from a claims-made policy to a new carrier, make sure the retroactive date on your new policy matches the one from your previous policy. This prevents a gap for incidents that occurred under your old carrier but haven’t resulted in a claim yet. Important: if your old policy was claims-made, you may also need to purchase tail coverage on that policy as you cancel or non-renew it. Without tail, you could have no coverage for incidents from prior years, even if your new policy has a matching retroactive date. If you’re moving to an occurrence-based policy going forward, occurrence coverage eliminates the need for tail on future policies, but it does not retroactively cover the claims-made gap from your old carrier. Ask your broker or new carrier to walk through your specific dates. 

• Keep every document from your old carrier, even if you were on an employer’s policy. Policy declarations, certificates of insurance, renewal letters, premium receipts, anything you have. Download or screenshot everything from your online portal now, because if the company goes into liquidation, that portal might disappear. Store copies somewhere you control. This is especially important for NPs and PAs who were covered under a physician’s, practice’s, or hospital’s group policy rather than their own individual policy. In those situations, you may not have documentation showing that you were insured, and when you need to verify coverage for a new carrier or establish a retroactive date for a claims-made policy, the lack of records can create real problems. Even if you’re the employee, always maintain your own proof of coverage. 

How Do I Pick an Insurance Carrier That Won’t Do This to Me? 

This is the question worth sitting with once the immediate crisis is behind you. When you’re comparing policies, the premium is what jumps out. It’s the number on the screen, and it’s natural to want the lowest one. But carrier insolvency is what happens when a company prices coverage lower than the actual cost of paying claims. The premium felt like a deal right up until the carrier couldn’t deliver on the promise behind it. 

Here’s what to look at instead. 

A.M. Best rating. This is the financial strength rating for insurance companies. A rating of A or higher means the carrier has been independently evaluated and has the reserves to pay claims. A++ is the highest rating available, and it’s what CM&F’s carrier-partner, MedPro Group, holds. If your carrier doesn’t have an A.M. Best rating, or if the rating is below A, that’s worth asking about. 

Admitted carrier vs.?surplus lines vs.?risk retention group. Admitted carriers are regulated by your state’s department of insurance and backed by the state guaranty fund. Non-admitted (surplus lines) carriers and RRGs are not backed by state guaranty funds. That doesn’t automatically make them risky, but it does mean that if something goes wrong, the safety net is different, and in some cases, there isn’t one at all. The practitioners left exposed by carrier failures in 2017 and 2019 learned this the hard way. 

How long they’ve been at this. A carrier that’s been underwriting malpractice for decades is pricing based on what they’ve actually paid out. A newer carrier might be pricing based on projections, which is fine until the projections are wrong. As William Sullivan, Executive Vice President of CM&F Group, puts it: most new carriers need five to eight years of data before they really understand how their book of business performs. When the payouts start arriving, the math changes. CM&F has been insuring healthcare professionals since 1919, which is 107 years of actual claims experience behind the pricing. 

What the policy actually does, not just what it costs. Defense costs paid outside your coverage limits. Consent-to-settle rights so nobody settles a claim on your behalf without your approval. Licensing board defense as a separate benefit. Occurrence-based coverage that doesn’t require tail coverage when you change jobs, retire, or (as we’re seeing now) lose a carrier. These features are what separate a policy that protects you from one that just collects a premium. 

Key Takeaways 

Nobody expects their insurance company to go under. But when it happens, the practitioners who come through it cleanly are the ones who act quickly, understand their policy type, and don’t wait for someone else to figure it out for them. 

If your carrier has become insolvent, confirm your policy status in writing, find out whether your state’s guaranty fund applies (it only covers admitted carriers, not surplus lines carriers or RRGs), and get new coverage in place immediately. Don’t let a gap open. 

Occurrence-based policyholders are better positioned than claims-made policyholders in an insolvency. Occurrence coverage responds to past incidents regardless of when the claim is filed. Claims-made policyholders need to secure tail coverage on their old policy and confirm their retroactive date carries over to any new policy. 

Renewal rights agreements are not policy transfers. Your new carrier did not assume your old carrier’s liabilities. 

If you’re an NP or PA who was covered under an employer’s or physician’s policy, get your own proof of coverage and keep it. You may need it years from now. 

When choosing your next carrier, look past the premium. Check the A.M. Best rating, find out whether it’s an admitted carrier, a surplus lines carrier, or an RRG, ask how long they’ve been in the market, and read the policy features before you buy.