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Medical Malpractice Tail Coverage For Doctors

Summary

In this article, we look at medical malpractice tail coverage. What it is and what are the options for physicians when it comes to purchasing tail insurance? Some ways a doctor can realize immediate savings on their annual costs through changes to their malpractice coverage are explained.

Medical malpractice claims often take a long time to surface

A claim for misdiagnosis, failure to exercise the standard of care, or delay in diagnosis could take months or even years to surface. Because of this, physicians need to have coverage in place for not only claims reported during the current policy period, but also for claims that arise and/or are reported long after the policy ends.

When you purchase a medical malpractice insurance policy, there are two different types of coverage from which to choose. This type of policy will determine your need for extended reporting coverage (a.k.a. tail) coverage.

  • Occurrence Coverage: Coverage will respond to incidents arising from the coverage period - regardless of when those claims are reported. No tail coverage is needed because incidents that occurred during the policy period are covered no matter how much later they are reported. Occurrence coverage tends to be very expensive because you are prepaying for tail costs whether the tail gets used or not.
  • Claims-made Coverage: Coverage will respond to incidents arising on or after the policy retroactive date and which are reported during the term of the policy. Tail coverage is needed to respond to cover incidents that have not been reported to the company during the policy term. Claims Made coverage is usually less expensive than purchasing occurrence coverage. The pricing of Claims-made coverage involves a step process with premium increases usually over the first five years of coverage in increments set by a carrier’s rate filings with the state in which you are practicing. The initial premium and subsequent years' premium are substantially lower than an occurrence policy. By the fourth or fifth year the claims made premium reaches a mature level and premium adjustments are based on annual rate changes only. Additionally the premium is lower as you are not prepaying for your tail coverage, and there are several ways you may not need to pay for it at all.

When you choose to purchase the Claims-made coverage, you need to know your options at the time of purchase to cover those claims that are reported after the termination of your policy. The main options are as follows:

A patient's medical experience is dramatically affected by interactive telemedicine Know your tail options when it come to purchasing Claims Made coverage

• Retirement

If you keep your claims made policy until retirement, your insurance carrier may offer you free extended reporting coverage (aka tail). Often times there is a vesting period and an age requirement you have to meet so make sure to review your quotes carefully. Upon meeting those criteria and retiring from the practice of medicine, you may receive free tail coverage at no cost to you. Many carriers use the 55/5/retire rule which is free retirement at age 55 with 5 years of coverage with the insurer. Free extended reporting period can also apply under your policy if you are totally disabled or if you expire.


• Purchasing Prior Acts coverage

Often times, physicians are concerned that they may not be insured by the same insurance company their entire career. Others want the flexibility to move from one job to another or one state to another and don’t want to pay for extended reporting coverage. The simple way to accomplish this is to purchase prior acts coverage. On a claims-made policy, there is a retroactive date. A retroactive date is the date from which a policy will respond to claims that are reported during the policy period. Often times, the retroactive date is the first date that you purchased claims made coverage. As a physician moves from job to job, carrier to carrier or state to state, the new carrier honors the retroactive date of the prior policy thereby eliminating the need to purchase tail or extended reporting coverage. This retroactive date advancement is commonly used and allows the physician to move carriers freely thereby avoiding the expensive tail purchase requirement.


• If you must purchase tail, shop around for the best terms and pricing

It may be cheaper to purchase a separate stand-alone tail policy from a carrier other than the one who wrote your claims-made policy. Review your employment agreement, if any, to determine if you are required to buy tail insurance from the carrier who wrote your claims made policy. Depending on the state you practice in, your specialty, and your claims history, there could be malpractice insurance carriers eager to write your tail coverage for substantially less than what your current carrier is offering.

You also should consider purchasing different amounts of extended reporting time. Most standard carriers will automatically quote you indefinite tail. Indefinite tail means that you have an unlimited time to report claims to the carrier after the policy ends. Many carriers offer shorter duration tail, such as 1 year, 3 years or 5 years. Depending on your specialty and practice and the type of risk you wish to take, you could purchase a shorter duration tail thereby saving you additional money. Be aware, however, that if claims are reported after the time frame has expired, there will be no coverage.

You can also consider purchasing lower limits for your tail coverage than the limits you had while your insurance is in force. Unless your employment agreement states that you must buy equal limits to those while the policy is in force, the carriers may offer you lower limits at a lower premium.


Physicians are looking for ways to cut their annual expenses

In these times, every penny counts. Physicians are looking for ways to cut their annual expenses. Switching from Occurrence to Claims Made Coverage is easy and likely will provide you an immediate savings to your bottom line. A physician can change from an occurrence policy to a claims-made policy easily. The physician does not have to purchase tail at the time of the change because the occurrence policy will cover claims reported after the policy ends. As such this is one easy way to improve your bottom line and cut malpractice expenses.

Regardless of which policy you choose to purchase, claims made or occurrence, make sure to inquire about the need and cost of extended reporting coverage up front. A good broker should be able to discuss both cost and options at the time of purchase so that you can evaluate your bottom line cost of malpractice.

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