When it comes to Medical Malpractice insurance coverage (a form of Professional Liability insurance), understanding the nuances of Tail coverage is crucial for anyone in your medical practice including physicians, surgeons, nurse practitioners, and office administrators. Making an informed decision about the best insurance policy involves considering three key factors: prior acts, policy form, and cost.
What is Tail Coverage?
Tail coverage, often referred to as an “Extended Reporting Endorsement,” is a critical protection that extends the claims-reporting period beyond the policy’s expiration date. This coverage ensures you are protected against medical malpractice lawsuits by covering any future claims arising from incidents that occurred after the retroactive date but before your policy expired.
Malpractice Tail coverage is technically an endorsement to your Medical Malpractice policy that can extend the coverage for a limited time (typically 2-3 years) or indefinitely. However, this additional coverage comes at a cost. The endorsement typically requires an extra premium, which can be quite expensive.
Cost of Malpractice Tail Coverage
The cost of Tail insurance can vary significantly between insurance providers. Generally, most insurance carriers charge between 2.5 to 3 times the annual policy premium. While the cost is a major consideration, you can find more affordable options by shopping around. Consulting with a Medical Malpractice insurance broker can be beneficial, as they have extensive experience in securing quality Tail coverage at competitive prices. By comparing different options in the market, they ensure that you get the best deal.
Policy Forms: Claims Made vs. Occurrence
Whether you need Tail coverage or not depends largely on the type of policy you have. Medical Malpractice insurance policies come in two basic forms: Claims Made and Occurrence.
An Occurrence policy covers incidents that happen during the policy period, regardless of when the claim is filed. This means that even after the policy is canceled, any claims arising from incidents that occurred while your policy was active are still covered. One downside of Occurrence policies is the risk associated with the insurance company becoming insolvent, potentially leaving claims uncovered.
On the other hand, a Claims Made policy covers claims only if they are made while the policy is active. If your policy is canceled, claims are not covered unless you purchase a Tail endorsement, which extends coverage from the original effective date or the retroactive date indefinitely.
Understanding Prior Acts
Unlike other types of insurance, such as Property or Casualty insurance, where claims are made shortly after an incident, Medical Malpractice claims often surface months or even years later. This delayed reporting underscores the importance of having a Claims Made policy. Why? Because only this type of policy can be offered with Prior Acts protection.
What is Prior Acts Coverage?
Prior acts coverage, also known as “nose coverage,” is an insurance provision that protects you against claims arising from incidents that occurred before the start date of a new Claims Made policy. This coverage ensures that if a claim is filed for an event that happened under a previous policy period, the new insurance policy will respond, provided it includes Prior Acts coverage.
For example, if a claim is filed against you today for a surgery that took place 5 years ago, your current policy (if it covers Prior Acts) will address the claim, even if you had a policy with a different insurer back then.
So, when purchasing your Claims Made coverage make sure it includes coverage for prior acts going back to your retroactive date, which is typically the date you began practicing, and it should remain consistent in all future Malpractice insurance policies.
When to Purchase Malpractice Tail Coverage
Tail coverage is necessary when you cancel a Claims Made policy, unless your new policy covers prior acts. In such cases, the new policy assumes all risk from the retroactive date forward, regardless of when the incident occurred. There are several scenarios where you might need to cancel a Claims Made policy:
Transitioning to a New Employer: If you move to an employer who provides Medical Malpractice insurance, the new coverage must include prior acts. Otherwise, you will need to purchase Tail coverage to protect against claims arising from previous incidents.
Retirement, Death, or Disability: In these circumstances, insurance companies often provide Tail coverage at no additional cost. However, exceptions and specific requirements may apply, so it is crucial to understand the terms and conditions of your policy.
The Importance of Tail Coverage
Without Tail coverage, healthcare providers risk facing Malpractice claims and lawsuits. This exposure can have significant financial and professional repercussions for your medical practice. So, it is essential to grasp the basics of Tail coverage before selecting a policy.
Seek Guidance from an Experienced Broker
Navigating the complexities of Medical Malpractice insurance can be daunting. Our Medical Malpractice insurance team can provide advice to help you navigate the coverage selection and buying process, ensuring that you find the best coverage at the most competitive rate. With years of experience in the industry, we can provide valuable insights and options tailored to your specific needs.
If you have any questions about this topic or would like to buy Tail coverage, don’t hesitate to reach out to ppatel@hilbgroup.com.