In an article written for the medical economics blog, “Do you need malpractice tail coverage?” Erik Leander addresses the most commonly asked questions about the intricacies of carrying this type of coverage.
“Tail Coverage” provides medical malpractice insurance coverage for claims brought after a claims-made insurance policy is terminated. Claims-made policies, the most common type of Medical Malpractice Insurance, provide coverage for claims brought against a physician resulting from services the physician provided during the time the claims-made policy was continuously in effect.
The common way to purchase this coverage is to make a decision within 30 days of canceling the policy you hold with your present malpractice company.
Usually, the term of tail coverage is indefinite, meaning the tail endorsement will cover you and your estate against any claim presented indefinitely despite being based upon or stemming from services provided under the policy you just cancelled.
This endorsement is an important financial protection tool because claims-made policies are generally less expensive due to the fact that they are not calculated using an actuarial estimate of the cost of any potential future claim based on your specialty and territory of practice. This decreases the premiums paid, making it more affordable, but it does limit the term of the coverage. Claims-made policies only respond in the present. This means there is no coverage for a claim brought after a claims-made policy is cancelled or not renewed. Tail malpractice coverage solves this problem.
Tail insurance needs to be addressed fairly quickly when a practice change occurs. It would be a mistake to simply assume you won’t get sued because you practice good medicine or you did not see as many patients as anticipated. If you have performed any services at all, you need to handle your future insurance liability protection based on the services you were performing before changing practices.
If the incumbent insurance carrier is quoting a ridiculous number and not offering any terms other than indefinite, and you feel that extending their policy by a few years is not a comfortable solution, you can go to the standalone tail market to purchase a policy.
This market is vibrant and real and can offer an alternative that is more budget-friendly. Conversely, you can negotiate with the institutional practice you are joining to build in a signing bonus to offset the cost of tail with your incumbent carrier.
The most common and most affordable method is to not purchase tail at all but rather convert the current claims-made policy with its original retroactive date into the new group or solo practice insurance policy. This is referred to as retroactive coverage and it absolutely negates the need to purchase tail.
Some would argue that this kicks the can down the road. Indeed it does, but as long as the “can” is well-protected (e.g., the coverage dates back to your original policy start date), it is a cost-saving measure and defers the decision and the cost to a time when perhaps that expense is more manageable.
Regardless of your specialty, it is important to understand that your professional service does not end when the patient leaves or at the end of the day.
The usual variables drive the cost and the availability of tail policies; higher-risk specialties will be harder to shop on the open standalone tail market, for example, and coverage in Illinois, Louisiana, Indiana, and Mississippi can provide unique challenges due to state laws. It is important to work with a broker who understands the market and has access to various products they can sell when it comes to getting you covered. All it takes is one reasonable competitive offer from an insurance company to help you jump this hurdle and provide financial security.
On the same level of priority as protecting your assets is providing the necessary insurance documents to groups you are considering joining. With so many acquisitions and mergers in the healthcare field, it is increasingly likely that you will be joining a group of 50 or more physicians. These medical groups will at times require you to come in to their practice with proof of tail. When you cancel or if you are considering a change, ask your broker questions about how you are currently covered, including the cost of tail coverage and the availability of options. Weigh your options and be ready to discuss with a potential employer when you are in the process of changing practices.