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What Addiction Counselors Should Know About Malpractice Insurance

Updated: Feb 28

As the vast majority of addiction professionals work in agencies and treatment programs, we often never think about malpractice insurance, also known as professional liability insurance. We assume the agency or program’s corporate policy will protect us if there is a lawsuit brought against us or the agency for malpractice. Unfortunately, if we are wrong, the legal and financial consequences can be disastrous.



As the vast majority of addiction professionals work in agencies and treatment programs, we often never think about malpractice insurance, also known as professional liability insurance. We assume the agency or program’s corporate policy will protect us if there is a lawsuit brought against us or the agency for malpractice. Unfortunately, if we are wrong, the legal and financial consequences can be disastrous.


If you work for an agency or program and provide any service related to substance abuse or mental health services, you must verify that you are covered by the corporate professional and general liability policy. If you are in private practice, you should never practice without malpractice insurance and general liability insurance. What’s the difference? Malpractice insurance covers you for clinical issues related to the services you provide, and general liability covers you for business liability issues such as slips and falls, or electronic data intrusions and theft.


If you work for an agency or program and provide addiction counseling, assessment, screening, intake, drug testing, or any other services, you could become the target of a malpractice lawsuit. Even if the client or patient sues the agency or program, you may also be personally named in the lawsuit. You will be unprotected if the agency does not have professional liability insurance, didn’t make their payment, let it lapse, or the policy excludes you.


What happens if you are unprotected at an agency or in private practice? You will pay for all of the costs related to your legal defense and any settlement or judgment amounts. These can easily reach hundreds of thousands of dollars or millions in worst-case scenarios. If you have professional liability insurance, then the insurance company pays for your legal defense and covers the cost of the settlement or judgment up to the policy limits.

Many years ago, I performed counseling services at a non-profit agency that was not technically a “treatment program.” Because it wasn’t a treatment program, but addiction counseling was provided there, they were not licensed or certified by the State. Typically, when a program becomes licensed or certified, the State checks the liability insurance to make sure that they are properly covered. If the program is not licensed or certified, no one may ever check. You should, even if the program is licensed or certified. When I inquired, I discovered that no policy covered me for professional liability. What did I do? I purchased a policy that provided me with professional liability coverage up to $1,000,000 per incident or $3,000,000 in total while working for that employer. My cost for the policy was $56. There are few things in life that one can buy with $56 that brought me that much comfort and security. As a result of my inquiry, the agency also obtained proper coverage, but I still kept my policy just in case.


Who can obtain malpractice insurance coverage? Any certified or licensed addiction professional in any state can get malpractice insurance coverage. Most students can also purchase insurance coverage while they are in school and working as an intern or completing their practicum. My annual malpractice policy in California for my practice costs $126.


Here are some facts you may find interesting from HPSO’s 2019 Counselor Liability Claim Report: 2nd Edition:


  • 13% of all malpractice claims were filed against Alcohol & Drug Counselors. The majority went to “mental health counselors,” such as LMFT’s and LPCC’s.

  • 16% of malpractice claims were against someone in private practice, 10.2% were against clinics, and 8.7% were against alcohol and drug treatment centers.

  • The total amount paid out in claims on malpractice lawsuits has doubled since 2014. This means more people are being sued!

  • 63.7% of claims closed with no action taken, representing a successful defense of the insured counselor.

  • Failure to maintain minimal professional standards, sexual misconduct, breach of confidentiality, and reporting to third parties were the main reasons claims were paid on cases that were settled or were lost.


The best defense against being sued for malpractice is adhering to your scope of practice, maintaining professional standards, and obeying all ethics rules. However, just because you do everything right does not guarantee you will be safe. Frivolous and fraudulent lawsuits and charges happen more than we think. It’s simply not worth the risk for the reasonable cost of a malpractice policy. If you are in private practice, many landlords or clinicians who are subleasing space will require you to add them to your policy (the general liability policy) and provide proof before you move in. This requirement is standard and acceptable in the event you are ever required to do so.


My preferred malpractice and general liability insurance provider is HPSO. They are my preferred provider for several reasons. They have very competitive rates, excellent coverage limits, superior customer service, and they operate in all 50 states. Also, if you need to add a landlord to your policy, they will do it for free. You can purchase coverage that is effective immediately right through their website and have your proof of coverage by the end of the day.


Michael O’Brien, CADC II, NCAC I, SAP, is the author of Addiction Private Practice: The Definitive Guide for Addiction Counselors and Therapists, and the Founder of the Addiction Professionals Network.

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