Tail malpractice insurance, purchased from a doctor’s current malpractice insurance provider, extends a physician’s coverage after they end their claims-made policy.
Claims-made policies, one of the most common types of malpractice insurance, are limited in their coverage. They only protect you for claims that are filed while you hold your policy, addressing only events that happened during your policy.
For example, if you had claims-made insurance from 2010-2015, that insurance would only cover you during those five years. If you were sued in 2016 about something that happened in 2015, you wouldn’t be covered, even though you had insurance at that time.
Tail coverage doesn’t work like a new insurance policy. It doesn’t cover claims filed for events which occurred after your policy ended. However, tail coverage does cover claims which address events occurring during the time of your coverage, but which are filed after your policy has technically ended. Without tail coverage, you would have to pay these claims out of pocket. With tail coverage, you’re still protected.
Basically, tail insurance makes a claims-made policy into an occurrence policy. Occurrence policies cover any claim about procedures that took place while your policy was in effect, even if that claim is filed after your insurance policy expires. Because occurrence-made policies are so expensive, some employers prefer that you take on the burden of the extra coverage yourself in a tail coverage policy.
If you’re switching to a new employer’s insurance, they may or may not provide nose coverage. Nose coverage, also called “prior acts,” covers old policy claims that are filed during your new insurance coverage. Without nose coverage, your new insurance won’t help you with any claims arising from the period where you were insured by someone else. If this is the case, you might need tail coverage.
This is a common problem if you’re hired by a hospital or health system. Because most hospitals and health systems are self-insured, they usually can’t or won’t give you nose coverage when you sign on.
If you join a hospital or private practice in a different state, you will likely have to purchase tail insurance. Even if your new insurance plan has nose or “prior acts” coverage, pay careful attention to the caveats. Most plans won’t insure events that happened in another state. So even if your new plan has nose insurance, it may not cover the state where you worked.
What’s more, many hospitals have laws that demand doctors buy tail coverage. They require that you’re covered for the whole time you were practicing, even if claims are filed after you leave. Some hospitals go so far as to deny all privileges to doctors with a gap in their malpractice coverage. Similarly, many group practices require doctors to buy tail insurance when they leave, something many doctors don’t realize when they join the practice.
Some states, such as New York, legally require doctors to have tail coverage. If you fail to purchase it, these states can suspend your medical license.
If you’re retiring, tail coverage is usually a must. Some claims can be for more than $1 million; one uninsured malpractice lawsuit could destroy your life savings.
To get tail coverage, physicians have to pay their insurer an additional premium. This is usually very expensive, about 150% to 300% of the price of the mature claims-made policy.
However, many doctors still choose to purchase it out of necessity. Unlike other types of insurance claims, malpractice claims aren’t immediate. If you get in a car wreck, you can quickly file for insurance, however the effects of malpractice might not be immediately perceived.
The damage of a bad diagnosis, wrong prescription, or other error may take months or even years to take effect or become noticeable. This leads to long gaps in time between when the patient receives your care, when they realize what happened, and when they file the malpractice claim. Because of this, doctors can be sued years after they cared for a patient. Many doctors need tail coverage for this reason.
One attractive option to cut tail coverage costs is to buy from a third party. This is often more affordable than buying it from your previous insurer, partly because third-party carriers cover less. These carriers can reduce protection to claims filed 3-5 years after the claims-made policy terminates, saving you money. Because most states require patients to file their claim within 3-5 years after the malpractice occurs, this can work.
There can be problems. The legal restrictions vary from state to state. In some states, plaintiffs have 3-5 years to file after they realize that damage occurred. Since it can take years for a patient to discover a wrong diagnosis or prescription, you could still be vulnerable to suits after 3-5 years of expired insurance. Also, some states give more time to minors or incapacitated patients to file, meaning that a 3-5 year tail coverage may not be sufficient.
Sometimes, third party insurers also offer weaker protection. Some only cover one $1 million payout per term, whereas most insurance policies cover several $3 million payouts per term. While sometimes cheaper, third-party coverage is also riskier.
Tail coverage is a common supplement to claims-made policies. In the absence of nose or “prior acts” coverage, it protects physicians after their insurance policies end. Obtaining tail coverage is usually a wise idea, as many claims are filed years after a procedure took place. Additionally, some states require tail coverage to practice.
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