Tail coverage refers to an endorsement that allows a policyholder to extend their reporting period beyond the end of a claims-made policy. When medical professionals or facilities practice under a claims-made medical professional liability policy (also known as malpractice insurance) the insurance carrier is obligated to pay claims that are reported within the policy period. But what if a lawsuit comes up several years after a physician has left the practice, alleging malpractice during the time the physician was employed? Since he or she had insurance during the time they worked there, they should be covered, right?
The answer is, it depends. In some cases, the liability will stay with the group or practice. If it does, then the physician is covered for claims reported in the future. If the liability does not stay with the physician’s former practice or facility, then it is incumbent upon him or her to purchase tail coverage when leaving that insurance coverage or carrier behind. Or, attempt to secure a retroactive date with the new place of employment to pick up his or her prior acts. Tail coverage is important to the medical insurance world because the lag in time from doctor-patient interaction to when the patient realizes something went wrong can be years. In fact, 3.5 years is the average delay for reported malpractice claims. It varies by state, but typically minors have until they are twenty years old to report claims on any treatment that happened throughout the course of their childhood. Having a tail in place ensure continuity of coverage throughout a medical professional’s career.
Who needs tail insurance?A physician leaving a group and moving on to a new group or facility
Most of the time physicians are required to pick up their own tail when changing to a new employer, as the new employer will require proof of coverage. An exception would be if the physician were able to secure “prior acts” (or “nose”) coverage from their new insurer or employer, which would apply a retroactive date to the newly secured policy covering the period from the old policy. In some cases, a physician group or hospital will offer prior acts coverage as an incentive when hiring highly sought-after physicians, and it is indeed a great incentive because the cost of tail can be high.A medical professional switching from a claims-made policy to an occurrence trigger policy.
An occurrence based policy covers any claim that occurred during the active policy period no matter when it is reported, even years later. Occurrence policies eliminate the need for a tail in the future. When switching from claims-made to occurrence, however, the new policy won’t cover any claims arising from before the occurrence policy started, therefore requiring the insured to extend their reporting period from the claims-made policy (i.e. tail coverage).A facility or group selling their company to a new entity.
The new owner will likely not want to pick up liability of their new acquisition from anything occurring prior to ownership. The seller in the transaction would need to purchase a tail.A physician or entity with bad loss history switching to a different carrier.
If the new insurance carrier sees a loss history they will likely not want to take on the liability of the doctor or facility’s past actions.Moving to a new state
It’s possible the current carrier might not write medical professional liability in the physician’s new state of residence. The physician will have to cancel their policy and find a new one with another insurer, and purchase tail to ensure continuity of coverage.
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.