Why Liability Insurance for Healthcare Facilities is Mandatory in the Czech Republic

Managers of medical facilities in the Czech Republic often face the challenge of determining the appropriate scope of insurance coverage and how to prevent situations where damages exceed the indemnity limit. In our practice, we observe that many facilities are underinsured and do not cover the actual risks associated with medical malpractice under Czech law. This article will highlight what to look for when selecting insurance, how to set limits, and why a professional approach is essential for protecting your assets within the Czech legal environment.

Why Liability Insurance for Healthcare Facilities is Mandatory in the Czech Republic

Operating any healthcare facility entails specific risks. Medical care involves complex procedures where even minor errors can lead to personal injury. This is precisely why, in the Czech Republic, professional liability insurance for healthcare providers is mandatory under the Act on Healthcare Services. Ensuring the correct scope of coverage is not merely a formal obligation, but essential protection against significant financial impacts.

Patients are increasingly well-informed and actively exercise their rights in cases of dissatisfaction. If healthcare services cause them harm, they often seek compensation for both pecuniary and non-pecuniary damages under the Czech Civil Code. It is not uncommon for such claims to reach millions or, in extreme cases, tens of millions of Czech koruna, particularly in situations where a patient suffers permanent consequences requiring lifelong care.

Our attorneys in Prague deal with healthcare facility cases daily and know how to resolve these situations effectively. Therefore, our Czech legal team can assist your facility in selecting appropriate insurance and ensuring its correct application.

What Professional Liability Insurance for Healthcare Facilities Covers

Professional liability insurance for healthcare providers covers an extensive range of risks. The basic scope includes bodily injury, non-pecuniary harm (including pain and suffering and impairment of social functional capacity), property damage, and subsequent financial loss. It typically includes legal representation costs and litigation expenses in Czech courts, meaning quality insurance should cover not only the patient's compensation but also the costs of a potential defense.

However, some healthcare facilities are unaware of specific exclusions and indemnity limits. Insurance primarily covers damages resulting from a breach of legal duty, but claims often arise from a breach of the duty to inform under the Act on Healthcare Services. Czech judicial practice shows that liability for interference with a patient's integrity without proper informed consent is a frequent reason for successful lawsuits, even if the procedure itself was performed technically correctly.

Our Prague-based attorneys can assist your facility with preparing template documentation regarding informed consent and other aspects to minimize legal risks. Likewise, we can help you review your insurance terms and ensure that the scope of coverage corresponds to the actual risks your facility faces under Czech law.

Legal Framework and Provider Obligations

The Act on Healthcare Services (No. 372/2011 Coll.), specifically Section 45, Paragraph 2, Letter m), explicitly requires healthcare providers to maintain a liability insurance policy for damages. This obligation lasts throughout the entire period services are provided. The aim of the law is to protect both patients and the providers themselves.

The professionals at our Prague law firm encounter the application of this law very frequently in practice. We understand how insurance terms work, how they are interpreted in Czech litigation, and the most common mistakes healthcare facilities make when negotiating insurance. The most frequent error is under-insurance, where the agreed indemnity limit is lower than the realistic risk of damages.

FAQ – Legal Tips for Mandatory Insurance

1. What is the difference between professional liability insurance and property insurance?
Professional liability insurance protects against claims from third parties (patients) for damages caused by the provision of care. Property insurance protects the facility's assets (buildings, medical devices, equipment) against natural disasters, theft, or destruction. Both types are essential.

2. Do I need professional liability insurance even if I work alone without employees?
Yes. The obligation to maintain insurance applies to all healthcare providers in the Czech Republic, whether they are individuals or legal entities under Section 45 of the Act on Healthcare Services, regardless of the number of employees.

3. What happens if I do not have insurance?
You risk sanctions from administrative authorities—fines can reach up to CZK 1,000,000 under the Act on Healthcare Services. However, an even greater risk is causing damage without coverage, as the patient's claim will be enforced directly against your personal or business assets.

The Difference Between Claims-made and Occurrence Insurance

In the insurance industry, we distinguish between two basic principles of coverage that have a fundamental impact on facility protection:

• Loss Occurrence: The insurance covers damages that occurred during the policy period, regardless of when the claim was filed.
• Claims-made: The insurance covers claims that are submitted in writing during the policy period, while the date the damage occurred is secondary (it must fall within the retroactive date).

If you have a claims-made policy (common in international insurance programs), you must be very careful when changing insurers or ceasing operations. If a patient files a lawsuit after the insurance has ended, the insurer may not pay, even if the error occurred while the contract was valid.

Indemnity Limits and Practical Pitfalls

The indemnity limit is the maximum amount the insurer will pay. Contracts usually contain two limits: a limit per single insurance event and an aggregate limit, which is the total limit for all events in one insurance year. A typical entry might look like "CZK 10 million / CZK 20 million".

This means that if a Czech court awards a patient compensation of CZK 15 million and your limit per event is only CZK 10 million, the healthcare facility must pay the remaining CZK 5 million from its own funds. This creates a fatal risk to the economic stability of a practice or clinic, which could lead to its liquidation.

In the Czech Republic, particularly following the implementation of the new Civil Code, claims for non-material damages related to health are on the rise. In cases of severe health impairment, total costs can climb into tens of millions of Czech koruna pursuant to Section 2958 et seq. of the Czech Civil Code. Today, a limit of CZK 5 million is considered insufficient for most invasive medical fields.

FAQ – Legal tips for selecting coverage limits

1. How do I know which limit is sufficient for me?
There is no universal figure. It depends on the medical field (e.g., surgery vs. dermatology), the number of patients, and the type of procedures performed. For high-risk fields, we recommend limits of at least CZK 10–20 million or more.

2. Is under-insurance truly dangerous?
Yes. Under-insurance implies the direct liability of the healthcare provider for the difference between the insurance limit and the actual damage. This can lead to the execution of the company's assets under Czech law.

3. Can I increase my limit during the year?
Yes, an amendment to the insurance contract can be negotiated. While this often involves a premium recalculation, it is safer than waiting for the policy anniversary.

Deductibles and their configuration

A deductible (spoluúčast) is the amount the insured contributes to each insurance claim. If you have a deductible of CZK 5,000 or 10%, it means you cover minor damages up to this amount yourself. A higher deductible usually reduces the premium price but increases the financial burden when a loss occurs.

In practice, it is vital to set the deductible so that it is not liquidating for the facility's cash flow in the event of a series of smaller claims, while ensuring the policy does not become unnecessarily expensive due to minor incidents. The ideal setting should reflect the financial reserves you are able to release immediately from operating funds.

Insurance exclusions – what the policy does not cover

Professional indemnity insurance contains several exclusions. Typical exclusions include damages caused intentionally or under the influence of addictive substances, activities performed without proper authorization, or aesthetic procedures without medical indication. Contractual penalties or damages resulting from neglected prevention are also typically uncovered.

A common point of contention is "expected complications" versus an "error in procedure." Problems arise if the insurer refuses to provide coverage, claiming it was not an insured event, even though the provider is facing a lawsuit and litigation in Czech courts.

This is where the role of an attorney is crucial to assess whether the insurer's refusal to pay is justified. Our Prague-based attorneys can identify whether there is a biased interpretation of the insurance terms and help you claim the compensation you are entitled to.

Specifics of medical fields – risk and pricing

The risk level of a field directly affects the premium amount and the required limit. High-risk fields include gynecology, obstetrics, surgery, or anesthesiology, where the highest health-related damages are a risk. Conversely, general practice or outpatient specialists usually fall into medium or lower risk categories.

Insurers set different rates for various specialties, and it is critically important to have the correct specialty listed in the contract. If you perform procedures beyond the scope of the reported activity, the insurer may reduce or completely refuse coverage in the event of a claim.

The attorneys at ARROWS law firm work with dozens of healthcare facilities and can compare your settings with the market standard for a given field in the Czech Republic. Thanks to our local expertise, we can determine whether your contract corresponds to the actual scope of the services you provide.

Insurers and their offers

On the Czech market, several large insurers and specialized entities offer liability insurance for healthcare facilities. Offers differ not only in price but primarily in the definition of an insured event, the scope of exclusions, and indemnity limits. Some products are designed as packages, others as standalone contracts.

It is important to monitor so-called sub-limits, where, for example, the limit for non-material damage compensation may be lower than the total insurance limit. Choosing the right insurer should not be based solely on the lowest premium, but on the quality of their claims settlement process.

Risks and Sanctions	How ARROWS helps (office@arws.cz)
Under-insurance of a healthcare facility: The limit is exhausted, the facility pays the remainder of the damage from its own resources, risking insolvency.	Risk analysis and limit setting: We assess the real risks of your field and recommend a safe limit to protect the company's assets.
Unjustified reduction of coverage: The insurer refuses to pay, citing a controversial exclusion or "breach of obligations."	Representation in disputes with insurers: Our Czech legal team has extensive experience in negotiations and litigation against insurance companies.
Recourse from health insurance companies: A Czech health insurance company recovers treatment costs for a patient harmed by medical error from the facility.	Comprehensive defense: We ensure that these costs (so-called consequential financial damages) are also covered by your liability policy.
Director's liability: The statutory body is liable for ensuring the company is properly insured (duty of due managerial care) under the Czech Business Corporations Act.	Legal compliance for management: We help set up processes so that directors do not breach their duty of due care under Czech law.
Dispute over informed consent: A patient claims they were not informed of the risks and seeks compensation, even though the procedure was performed lege artis.	Audit and revision of documentation: We prepare robust informed consent forms and train staff on their correct use in accordance with Czech legislation.

Informed consent and its role in insurance protection

Insufficient informed consent is a weak point in many legal disputes. The Supreme Court of the Czech Republic has ruled that if a physician fails to prove that the patient was properly informed about potential risks and alternatives under Section 2638 of the Czech Civil Code, they are liable for harm resulting from the procedure. This applies even if the procedure was performed lege artis (according to professional standards), provided the patient proves that, had they known the relevant facts (about which they should have been informed), it is probable they would have decided differently—i.e., not to undergo the procedure.

For an insurance company, the existence of a signed and specific informed consent form is a fundamental document. If it is missing, the insurer may argue that you have violated legal regulations under Czech law, which can negatively impact the insurance payout.

Our Prague-based attorneys from ARROWS law firm can help you set up processes to ensure your documentation stands up in Czech courts and before insurance providers.

Diagnostic Errors and Their Impact on Insurance

Diagnostic errors constitute a significant portion of insurance claims in the Czech Republic. If a serious diagnosis is overlooked, the resulting damage lies in the delay of treatment and the worsening of recovery chances. These cases are very demanding in terms of evidence and require expert medical opinions.

Medical facilities should have control mechanisms in place to minimize this risk. From an insurance perspective, it is crucial that the policy covers pure financial loss and non-material harm associated with the "loss of chance" under Czech legal principles.

Employees and Their Insurance Protection

According to the Czech Labour Code, an employee is liable to the employer for damage caused by negligence only up to 4.5 times their average monthly earnings. Primary liability for damage to a patient lies with the provider, i.e., the employer.

However, if a physician provides healthcare as a self-employed professional (OSVČ) in the Czech Republic, they are liable for damages with their entire personal assets.

ARROWS law firm in Prague will help you analyze contracts with personnel and determine the extent of coverage for each individual. This prevents situations where an insurer refuses to pay for an error made by an external contractor.

How to Handle an Insurance Claim in Practice

The procedure following the occurrence of damage is critical and involves timely reporting to the insurer without undue delay. Never admit liability or pay compensation directly to a patient without the insurer's consent, as you could lose your right to reimbursement. Cooperation with the claims adjuster is essential.

At this stage, it is vital to involve a lawyer. Our Czech legal team from ARROWS will take over communication with the insurance company and the patient's legal representative, ensuring that your statements do not worsen your procedural position and overseeing proper fulfillment by the insurer.

FAQ – Legal Tips for Resolving Insurance Claims

1. What should I do if I receive a pre-litigation notice?
Forward it immediately to your insurance company and contact your attorney in Prague. Do not underestimate the deadlines for a response under Czech procedural rules.

2. Can the insurance company choose a lawyer for me?
In most cases, you can choose your own legal representative, especially if a conflict of interest arises or in the event of litigation in Czech courts. These costs are usually covered by the insurance (up to the limit). Check your specific policy conditions.

Medical Insurance Costs and Optimization

The price of insurance is influenced by the facility's turnover, the number of doctors, the field of activity, claims history, and chosen limits or deductibles. Attempting to save money by lowering limits is short-sighted, as a low limit will be insufficient in the event of serious damage.

Optimization should consist of a precise definition of the scope of activities and bonus systems for a claim-free history. Saving a few thousand on premiums can mean losing millions when a claim arises.

Specialized Insurance for Medical Facilities

In addition to professional liability, a medical facility in the Czech Republic should consider general liability insurance for damages not directly related to treatment. Business interruption insurance, which covers fixed costs if the clinic cannot operate, is also important. A current topic is cyber risks associated with the leak of sensitive patient data and fines under GDPR.

Risks and Sanctions	How ARROWS Assists (office@arws.cz)
Property Underinsurance: After a fire, the facility discovers the policy does not cover the cost of new equipment (due to price increases).	Contract Audit: Our Prague-based attorneys will highlight the need to update insured amounts.
Business Interruption: Following water damage, the clinic is closed for a month, but rent and salaries must still be paid.	Business Continuity Consultation: We recommend suitable business interruption insurance to secure cash flow.
Cyber Attack: Ransomware encrypts records, resulting in a patient data breach.	GDPR and Cybersecurity: We handle the legal aspects of data breaches and reporting to the Czech Office for Personal Data Protection (ÚOOÚ).

Comparison with International Practice

In the USA, compensation amounts and insurance limits are many times higher than in the Czech Republic; however, Czech case law is gradually approaching the trends of the USA and Western Europe. Particularly for foreign nationals treated in the Czech Republic, claims may be calculated based on their domestic, often higher, cost of living.

If you provide care to international clientele, it is necessary to account for this risk in your coverage limits. Medical tourism brings specific risks that a standard Czech insurance policy may not fully cover.

Executive Summary for Management

• Risk of Underinsurance: A limit of CZK 1–5 million is insufficient for most facilities; we recommend a professional review under Czech insurance standards.
• Personal Liability: Statutory bodies are liable for ensuring the correct insurance coverage is set for the company under the Czech Business Corporations Act.
• Exclusions: Pay close attention to informed consent requirements and the scope of authorization to provide medical services in the Czech Republic.
• Processes: A correct response to an incident and timely reporting to the insurer is decisive for the payout of claims under Czech law.
• Complexity: Insurance is not just about the premium price, but about ensuring legal certainty within the Czech legal system.

Article Conclusion

Selecting the appropriate scope of insurance coverage for a healthcare facility is a strategic decision. You must consider many factors, such as the medical field, legal form, number of external contractors, and actual risks. An error in this decision can jeopardize the very existence of your practice in the Czech Republic.

If you are unsure whether your healthcare facility is correctly insured, contact our Prague-based attorneys at office@arws.cz. We will be happy to assist you with a legal audit of your situation. ARROWS law firm is insured for damages up to CZK 400,000,000, which guarantees the security of our legal consultancy.

FAQ – Frequently Asked Legal Questions Regarding Healthcare Facility Liability Insurance

1. What is the minimum indemnity limit a healthcare facility must have?

The Czech Health Services Act does not set a specific numerical threshold; it only states the obligation to have insurance contracted to an extent corresponding to the risks of the services provided. Determining an "adequate" limit is therefore the responsibility of the provider.

2. What happens if an insured event occurs during a period when I have no insurance?

If you do not have valid insurance or it does not cover the given period according to the contract principles, you must cover all damages and litigation costs in Czech courts from your own resources. The insurer will not provide indemnity in such cases.

3. Can I choose whether to have insurance, or is it mandatory?

It is mandatory. Failure to maintain insurance is an administrative offense punishable by a fine of up to CZK 1,000,000 under Act No. 372/2011 Coll. (the Health Services Act).

4. What is the difference between claims-made and loss occurrence insurance, and which is better?

Loss occurrence covers damages occurring during the insurance period, which is often clearer for providers, while claims-made requires the claim to be filed during the insurance period. There is no single "better" option; it depends on the continuity of your practice and the specific contract terms.

5. Can I take out insurance with a very low price and a very low limit?

Technically yes, you will fulfill the statutory obligation, but in fact, you expose yourself to the risk that in the event of serious damage, the insurance will not cover the costs and you will pay the remainder yourself. This is a false saving.

6. What should a healthcare facility do if it receives a lawsuit from a patient?

Immediately inform the insurer and hand the matter over to your legal representative. Do not take any steps, such as acknowledging debt or apologizing with an admission of guilt, without consulting experts. Contact our Czech legal team at office@arws.cz.

Disclaimer: The information contained in this article is for general informative purposes only and serves as a basic guide to the issue. Although we ensure maximum accuracy of the content, Czech legal regulations and their interpretation evolve over time. To verify the current wording of regulations and their application to your specific situation, it is essential to contact ARROWS law firm in Prague directly (office@arws.cz). We bear no responsibility for any damages arising from the independent use of information from this article without our prior individual legal consultation.

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