What Insurance Do Health System Contracts Require from Digital Health Vendors?

A health system contract sets specific insurance minimums as a condition of signing, and they routinely differ from what an early-stage digital health company carries. The most common gaps are the required per-occurrence limit on professional liability and the requirement that the health system be named as an additional insured. The health system’s legal and risk teams wrote those requirements, and they know exactly what coverage closes their exposure. Most vendors find out what they are missing when the redline comes back.

Why the Contract Dictates Your Coverage

A health system contracting with a digital health vendor is managing its own risk, and the insurance exhibit is how it pushes part of that risk back onto the vendor. The clause names the lines the system expects, sets minimum limits, and asks to be added as an additional insured or to receive a certificate evidencing coverage. These terms are not negotiable the way pricing is, because they come from the system’s risk function rather than the business owner the vendor has been selling to. The result is that the vendor’s insurance program becomes a gating item for revenue, the same dynamic described in what coverage a digital health company needs before its first enterprise contract.

The Two Requirements That Trip Vendors Up

The first is the per-occurrence professional liability limit. Health systems often require a limit higher than a seed-stage vendor carries, and they specify per-occurrence as well as aggregate, because a single incident affecting the system’s patients is what they are protecting against. A program sized for the vendor’s own comfort rather than the system’s requirement comes up short in the redline.

The second is additional insured status. Agreeing in the contract to name the health system as an additional insured and actually holding a policy that provides that status as written are two different things. The endorsement has to exist on the vendor’s policy, and its scope has to match what the contract demands, or the system’s protection is illusory when a claim arrives. This is the same mechanics labs face with hospital contracts, and it is worth understanding the endorsement itself rather than treating it as a checkbox.

The Coverages a Health System Typically Names

Beyond the professional liability limit and the additional insured endorsement, a health system contract usually names cyber and privacy liability, because the vendor will hold or touch patient data and a breach is the system’s central fear. That coverage should be written for a HIPAA-regulated holder of data with business associate liability addressed, the structure in cyber coverage for a HIPAA-regulated company, not a generic technology form. Technology errors and omissions, often combined with professional liability, answers a claim that the vendor’s software or service failed and caused the system a loss, the exposure behind a professional liability claim against a digital health product. General liability is standard, and the contract will specify endorsements such as a waiver of subrogation and a notice-of-cancellation provision that must be available on the actual policy.

What to Do Now

Treat the first health system pursuit as the trigger to right-size the program, not the signing. Ask the system, or your broker, for a representative insurance exhibit early, while the deal is in diligence, and confirm the program can meet it on lines, limits, and endorsements before legal review surfaces the gap. Pay specific attention to the per-occurrence professional liability limit and to whether your policy can actually provide additional insured status as the contract words it, because those are the two that most often fail at the redline. A program built to health system standard once tends to satisfy the next system with minor adjustments.

Before your next health system pursuit, get the insurance exhibit in front of your broker and confirm the per-occurrence limit and the additional insured endorsement are real on your policy. A specialty review through Tower Street Insurance can align a digital health vendor’s coverage to what health system contracts actually require.