When a physician leaves a job or ends a medical malpractice policy, future lawsuits arising due to patient care provided during the policy period may not be covered. That gap in coverage is often filled with a medical malpractice tail policy.
Whether an employer provides a doctor’s medical malpractice insurance coverage or it is self-purchased, tail coverage protects a physician, but might not matter to the employer.
And that is why doctors have to enter any patient care position with a thorough understanding of how they will be covered by medical malpractice insurance if the job ends. Even when a physician believes that a job will last forever, it is important to plan ahead for medical malpractice tail coverage in case there is a change down the road.
Claims Made and Occurrence Policies
There are two main types of medical malpractice insurance policies: claims-made and occurrence. Claims-made policies cover medical malpractice insurance claims that are made while a physician is paying for and covered by the policy. An occurrence policy covers medical malpractice claims that arise due to patient care during the time that a physician paid for and was covered by the policy— even after the policy ends.
Claims-made is not that common in the hospital-employed setting, where occurrence-based coverage is most common, says Leigh Ann O’NeiIl, JD, an attorney who helps physicians negotiate employment contracts. “Claims-made coverage is more common in the private employer setting”, O’Neill says.
A claims-made policy is the cheaper option, and for that reason, smaller private practice groups—that have less bargaining power with medical malpractice insurance companies than large hospital systems—tend to opt for it.
For example, Sam Slishman, MD, an emergency medicine physician who runs Pre-R, an urgent care practice in San Luis Obispo, Calif., has a claims-made policy.
“It costs less and gradually climbs for the first few years until it levels off. It worked well for me because it correlated with the number of patients I was seeing and the level of risk,” Slishman says.
Nose and Tail Policies
While occurrence policies do not necessitate tail coverage, a physician who was covered by a claims-made policy needs to have either tail insurance— or, in rare cases, a nose policy, after leaving a job.
Occurrence and claims-made policies might or might not cover new medical malpractice claims arising from patient care that occurred prior to coverage—this is often called nose coverage and it usually incurs higher premium costs.
Is Malpractice Tail Coverage Important?
Most physicians consider malpractice tail coverage important. Hiring a legal team and possibly paying for damages may result in an unpredictable cost that can climb into millions of dollars. Doctors can leave a job to start another job without having been made aware of an adverse patient outcome, and may be completely blindsided by a lawsuit.
That said, the cost of medical malpractice tail insurance can be hefty, averaging approximately 2.5 times the cost of a yearly premium, and often including provisions, such as the number of years covered.
Heather Fork MD, who runs The Doctor’s Crossing, coaches physicians who are at a crossroads in their career. She says that her clients have spent anywhere from $7,000 to more than $150,000 on tail coverage.
Despite the unpredictability of the financial damages that could be incurred by a lawsuit, some doctors take the risk of not purchasing a tail. “I know a direct primary care doctor who sold his practice and opted to wing it without a tail policy because he felt he knew all his patients well and didn’t have loose ends to worry about,” Slishman says.
It can be difficult for a physician to ask for tail coverage from an employer because it may seem as if the doctor is already planning to leave the practice. Yet common sense dictates that no one can be absolutely sure that he or she will stay in the same job for the full duration of a career—even the employer.
One difficulty in negotiating medical malpractice tail coverage is that medical malpractice insurance companies often do not quote a specific cost. This is in part because the cost may change. A physician who works for a longer period of time would have higher risk of having a medical malpractice lawsuit than a physician who has only worked for a few years. This affects the cost of a tail purchase. And if other factors that go into the cost of medical malpractice coverage change in the future—such as payouts for lawsuits in a physician’s specialty or region—these factors can also have an impact on the price tag of a tail.
The best way to ensure that medical malpractice tail coverage is part of an employment contract is to negotiate for it when starting a job. Once a physician begins an employed position, there is no incentive for an employer to add tail coverage to the physician’s contract because this can give an employed doctor a way out while costing the employer a large sum of money.
Fork explains that many physicians feel uncomfortable negotiating their contract.
“It’s not greedy to advocate for yourself. You can potentially “earn” thousands and sometimes tens of thousands of dollars from a few hours of negotiation,” she says.
Fork shares a cautionary tale about one of her clients who had a sour experience with a medical malpractice tail agreement when switching from one employed oncology practice to another. While both the new employer and the former employer refused to pay for the neurologist’s $70,000 tail, the new employer agreed to pay a signing bonus equal to the cost of the tail, which they termed a tail forgiveness plan that could be rescinded if employment ended within 5 years. There were drawbacks to the agreement, however.
“Forgiveness, for tax purposes, looks like income, making tax time particularly painful for those 5 years,” Fork’s client told her. Furthermore, the division director used a direct threat, stating, “You can be fired, revoking your forgiveness, forcing you to pay back all that money we let you have.”
A non-confidential report to the integrity hotline halted that threat, but the neurologist felt that the 5-year clause in the agreement deprived him of power.
However, even with the best contract negotiation, a doctor may still end up with a surprise tail cost. According to O’Neill, many contracts dictate that a physician’s tail coverage hinge on the reason for termination of employment, even with an occurrence policy.
“The physician employee is often responsible for tail if they are terminated with cause, or if the doctor terminates without cause, such as leaving or breaking a contract prematurely,” she says.
Leaving Practice or Retiring
Many medical malpractice insurers guarantee risk coverage for doctors who are over a certain age or who have worked for a specified period of time. The terms vary from one company to another, but they generally cover doctors who are over the age of 65 and who have paid for the same company’s policy for over 20 years.
Each doctor has to make his or her own decision regarding how much they can afford to negotiate (or not to negotiate) for medical malpractice tail coverage when taking an employed job. And for doctors who are paying for their own medical malpractice insurance, it is important to think about the financial costs of eventually moving or joining another practice.
Slishman says he can’t imagine ever shutting down Pre-R, and doesn’t think he would need a tail policy.
“I follow up every patient and we only invoice when patients say they feel better. That's good for damage control and seems to make patients really happy,” he says.
But he acknowledges that there can be a risk, and realizes that not buying a tail policy might be too cavalier.