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By Becky Thomson Tirey • November 9, 2017

What are my healthcare client’s options for tail insurance?

Many employment contracts define the liability parameters, essentially where that liability insurance will remain, in the event that a physician leaves employment of a group or facility.

A physician should carefully review and possibly negotiate terms relating to tail in their employment agreement when joining a new practice, group or hospital. If a benefit of their employment is a professional liability insurance policy that is claims-made, it is imperative to know that tail coverage will likely be necessary should they leave for new employment regardless of where they become employed next.

In most cases, a physician would be required to purchase their own tail coverage upon terminating employment, but it is worth asking for different terms depending on how employment ends. For example, if the physician is laid off, or terminated against their will, would the employer pay for their tail? Is the employee leaving because he/she was mistreated by the employer? These hypothetical scenarios should be documented in the employment agreement to increase the ease of transition and avoid conflict when employment ends. The agreement could state that the physician and the employer each pay for part of the tail depending on the situation.   

In some cases, the new employer will provide “prior acts” (or “nose”) coverage as an incentive to the incoming physician. If the new employer is unwilling to pick up the physician’s prior acts (liability) then he or she will need tail coverage.  

Once you’ve determined that your client, whether a medical professional or a facility, needs a tail insurance policy and they know they must pay for it, what are their options? The new employer will require the physician to obtain a certain amount of tail coverage to ensure they don’t get hit with liability for the new doctor’s prior interactions.

Extended Reporting Period (ERP) Endorsement on the existing policy

This was traditionally the only option for obtaining tail coverage, where limits and coverages remained the same as the original policy and even negotiating a fresh limit wasn’t an option. The tail was always “unlimited” meaning claims reported at any time in the future would be covered. This is still a viable option, but it’s typically the most expensive, starting at 200% of the physician’s normal premium, but can be much higher depending on the carrier and the coverage contained in the policy.

3, 5 and 7-year Tail Coverage

More recently tail coverage became available in shorter terms of 3, 5 and 7 years, which gives doctors more affordable options if their new employer requires a tail of a shorter term than unlimited.  

Stand-alone tail

Now, many carriers offer a standalone tail allowing an insured to shop around for a tail with different carriers, choosing different limits and coverage terms if desired. The stand-alone tail provides choice where it previously didn’t exist. So whether the new employer requires a certain term length, or unlimited, the physician can choose a new carrier and obtain fresh limits.

Consult an expert in the healthcare liability insurance sector to help review a physician’s employment agreement and any terms related to insurance coverage. Myron Steves brokers can help find the optimal tail coverage for an individual, group practice or multiple-location practices through an extensive network of healthcare liability markets.

Learn more about Myron Steves Healthcare Liability insurance or submit an application