18 Apr What is tail coverage and how does it relate to a doctor’s malpractice insurance?
Also known as Extended Reporting Period, tail provides coverage for incidents that took place while a malpractice policy was in force but does not get reported after the policy has been terminated. Tail coverage is only applicable to physicians that have a Claims Made malpractice policy; physicians with an Occurrence malpractice policy do not need to worry about tail coverage.
A Claims Made malpractice policy provides limits for claims made (or reported) during the current policy year, so only the current set of limits is available to pay for claims arising from all previous years of practice. Claims made coverage ends when the policy expires. The policy must be renewed or tail coverage must be purchased in order to provide a physician protection. This protection covers incidents that have occurred, but neither the physician nor the insurance company is aware that it will become a claim. Each malpractice insurer has different tail coverage guidelines and pricing. For many insurance companies, death and disability are automatic triggers for free tail insurance for physicians. Many insurers also offer the ability to get a free retirement tail, assuming predetermined requirements are met.
An Occurrence malpractice policy provides a separate set of limits each year the policy is purchased. Occurrence coverage does not end when the policy expires; limits remain available to pay for all future claims for incidents that occurred during that policy period until limits are exhausted for that policy period. No tail coverage is needed because incidents that occurred during the policy period are covered regardless of when they are reported, subject to the policy limit.
The reason some physicians opt to purchase a Claims Made policy over an Occurrence policy is because the price of a Claims Made policy is significantly cheaper for the first few years. Generally, after 5 years, the insurance premiums for the two different policies become almost identical. The theory is the premium savings for a Claims Made policy over the first few years should be saved and used to pay for tail coverage.
For a physician not clear on where the future will take them, we suggest an Occurrence policy. For physicians who have no plans to move or take significant time off from practicing, a Claims Made policy would likely work. Each physician should take into account their specific situation in deciding which type of coverage best suits their needs.
Phalanx Healthcare Solutions is a New York based medical malpractice insurance consultant specializing in insurance and reinsurance solutions for physicians, physician organizations, and healthcare systems. For more information, visit our web site at www.phalanxllc.com.