Do you need malpractice tail coverage?

In today’s evolving healthcare system, physicians are changing practice settings more often than ever. Whether it’s leaving private practice for hospital employment, merging practices, opting to join a group practice or moving to a new state—any career change can mean a change in medical malpractice insurance. Physicians considering terminating a claims-made insurance policy due to a career change or any other reason need to be aware of the importance of tail malpractice coverage.

Tail malpractice coverage provides insurance coverage for claims brought after a claims-made insurance policy is terminated. Claims-made policies (the most common type of medical malpractice insurance policy) 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. 

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. 

Practice change scenarios 

Whenever a physician terminates a medical malpractice claims-made insurance policy, for any reason, the issue of tail malpractice coverage needs to be addressed. Here are some typical scenarios physicians might face when terminating a claims-made policy:

Leaving a solo or group practice to become a hospital employee.

Hospitals typically provide medical malpractice insurance for the physicians they employ. However, if a physician was insured under a claims-made policy prior to hospital employment, hospitals will often require the physician to purchase tail malpractice coverage to cover any claims that might arise from the physician’s prior practice.

In negotiating hospital employment, a physician may be able to have the hospital pay for the cost of tail malpractice coverage or the hospital might allow the physician to continue their current coverage, so that tail malpractice coverage isn’t necessary. Additionally, the hospital may be willing to provide prior acts coverage under the hospital’s own insurance program. It is important to discuss these options early in negotiations with the hospital.

Merging an independent solo or group practice with another independent practice.

In this scenario, prior acts coverage would usually be available through the insurance company that ends up insuring the merged entity. This would eliminate the need to purchase tail malpractice coverage. Once again, it is important to discuss this early in any negotiations. 

Leaving an independent group practice or hospital employment group to start a solo practice or join another independent or hospital group practice.

When a physician moves from a group practice to a solo practice or a different group practice, the prior practice may require the physician to purchase tail malpractice coverage. This requirement is often part of the employment agreement with the group practice. 

Prior to signing an employment agreement, it may be possible to negotiate that the new practice be responsible for purchasing the departing physician’s tail malpractice coverage. Or the policy insuring the departing physician’s new practice setting could include prior acts coverage for the previous policy, which may satisfy the requirement to purchase tail malpractice insurance. 

Moving to a different state, where the current insurance provider does not offer coverage.

Not every insurer offers coverage in every state and locale. A relocating physician may be able to keep his or her current medical malpractice insurance company, but there is no guarantee.

Depending on the location, insurance rates may also increase or decrease based on the local medical malpractice insurance market. Physicians should contact their insurance company ahead of time to find out whether or not they can keep their current policy and to ask about any policy or rate changes due to the move.

If it’s possible to keep the current policy, it probably won’t be necessary to purchase tail malpractice coverage. If the current insurer cannot provide coverage in the new state, it may be possible to find an insurer that provides coverage in both the physician’s new and old state. In this case, the new insurer should be able to provide prior acts coverage for the physician’s former state, avoiding the need to purchase tail malpractice coverage.

Retirement from medicine.

The good news is that  many medical malpractice insurance companies provide free tail malpractice coverage to retiring physicians. However, the insurer may include restrictions based on the physician’s age and the number of years continuously insured with the current insurance company.

Physicians planning for retirement should talk to their insurance company about their plans to make sure they are properly covered. No one wants to spend their retirement years worrying about potential malpractice claims!

 Permanently leaving the practice of medicine for another reason.

Physicians who are permanently leaving the practice of medicine for a reason other than retirement, such as disability or a career change, will need to make sure they have tail coverage. Physicians suffering from a disability that prevents them from practicing medicine may find that their insurance company provides tail malpractice coverage at no cost. This depends on factors such as the nature of the disability, so physicians will need to contact their insurance company.

Physicians leaving the practice of medicine for a different career opportunity will need to purchase tail malpractice coverage to cover any claims brought against them after they have quit practicing medicine. 

Erik Leander is the chief technology officer and chief information officer of Cunningham Group, a medical malpractice insurance agency.