Extended reporting period, or tail, coverage for medical malpractice insurance: Common and costly misconceptions

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Many Americans, including many medical professionals, value job mobility. One recent survey found that more than half of physicians surveyed had changed jobs or job types between 2022 and 2024. Early-career physicians may be especially mobile, with more than half changing jobs within five years of leaving training. But the step-by-step process of moving into a new practice opportunity may be more involved than some expect.

For many clinicians, extended reporting period coverage, commonly referred to as “tail coverage,” is a vaguely familiar term that they may associate with job change or retirement. But what is tail coverage, exactly, and what’s the right time to consider options? (Hint: It may come sooner than you think.)

What is tail coverage?

Laura Archer, CPCU
_{@ The Doctors Company}

Tail coverage is a feature of medical professional liability insurance for physicians and other clinicians. It should not be confused with traditional health insurance, which covers patients’ access to care.

Tail coverage extends the period of time during which a claim can be reported to the insurance carrier on a canceled claims-made medical professional liability insurance policy. The extension may be indefinite, or it may be for a predetermined term.

A claims-made policy covers allegations of medical negligence related to the rendering of professional services that take place:

1. In your covered territory
2. Entirely on or after your retroactive date
3. Prior to the termination date of the policy

Here’s an example of how tail coverage extends the protection offered by a claims-made policy: In 2022, a surgeon is protected by a claims-made policy and performs a procedure at ABC Ambulatory Surgery Center. Then in 2023, the surgeon changes jobs to XYZ Hospital — and changes insurers (though it’s not necessary to change insurers to adopt a new policy). In 2024, with the surgeon still at XYZ Hospital, a claim is reported against the surgeon alleging medical negligence related to care and treatment rendered in 2022 at ABC Ambulatory Surgery Center.

What happens now?

• If the surgeon in 2022 had purchased a tail coverage policy, that policy would most likely cover defending the surgeon against the patient’s allegation.
• If the surgeon had not purchased tail coverage, they may not be entitled to a defense or indemnification from an insurer. The financial results could be catastrophic for the surgeon and their family, because the surgeon’s personal finances could be at risk from litigation or indemnity costs.

Let’s review options for when and how tail coverage can be acquired.

When should tail coverage be purchased — or negotiated?

At a minimum, the potential for future tail coverage should be addressed before the clinician leaves a practice or organization. Often it can be addressed at the time they begin employment. When it comes to planning for tail coverage, sooner may be better.

A trusted agent or broker has the expertise to match a medical professional’s risk profile to an insurer who can meet their needs. They can also advise physicians regarding how their employer’s coverage and their own might overlap. For instance, considering tail coverage, clinicians may not be aware that they have many options:

• They can negotiate with their employer to cover the cost of tail coverage upon leaving the practice. This may be addressed in an employment contract.
• Any clinician leaving one practice and joining another could negotiate for their new employer to pay the tail coverage attached to the prior (canceled) policy. Prospective employers often use creative techniques to recruit strong candidates.
• The new employer may allow the medical professional to be added to their policy using the same retroactive date that was on the former policy. This is referred to as prior acts coverage or “nose coverage.” Carrying your retroactive date forward to your new policy alleviates the need to purchase tail coverage on the former (canceled) policy.
• Physicians can research their carrier’s retirement tail provision. Many carriers grant an earned retirement tail — partial or full waiver of premium — to insureds who (1) remain insured with that carrier for a certain number of years, and (2) completely retire from the practice of medicine. As long as a medical professional meets that carrier’s vesting period, the tail can be issued at no charge (or reduced charge) upon retirement.

How can physicians avoid gaps in coverage?

With any claims-made policy, dates matter. If a medical professional takes a job with a new group and moves to that group’s insurance, the new insurer may offer retro-date inception coverage — commonly known as first-year claims-made coverage. Coverage offered on a first-year claims-made basis means that no coverage exists for any incident resulting from professional services rendered prior to the effective date of the new policy. In other words, the retroactive date on the policy will be equal to the effective date of the policy. Understanding your retroactive date is critical to understanding your coverage period. It’s the farthest date back that your policy will cover you for any claims or allegations that arise from incidents stemming from your rendering or failure to render professional services.

Why doesn’t everyone have tail coverage?

Tail coverage is expensive. Costs could range from a full year’s annual premium to a multiple of your annual premium. This is another incentive to plan ahead and negotiate with your employer, if possible.

By going uninsured for any period, clinicians risk a lawsuit that goes after their personal assets. In an era of social inflation, in which juries keep awarding ever-larger verdicts to plaintiffs, that notion should give you pause. From 2013 to 2023 in the United States, the number of medical malpractice verdicts awarding $10 million or more to the plaintiff shot up roughly 67%.

What about vesting for tail coverage?

A medical professional may meet conditions, set by their insurer, to receive earned tail coverage (waiver of full or partial premium). For instance, a retiring medical professional might qualify for earned tail coverage after a certain number of continuously insured months or years.

Vesting for earned tail coverage is a simple concept, but it can get complicated when it meets life circumstances. For instance, if you’re considering changing carriers and you’re in the latter half of your career, you’ll want to ask questions about vesting requirements with your current carrier and compare them against what your prospective carrier may offer.

If you’re three years from retirement but the vesting requirement for an earned tail is five years, you would not be eligible for a waiver of premium, and you could be looking at a significant financial event. It’s better to examine tail coverage options before changing jobs or insurers, or when retirement is still a long way in the future.

What if I’m vested for tail coverage, but my carrier gets acquired?

If your medical professional liability insurer gets acquired by another carrier, it’s possible that your vesting for tail coverage will still be honored with the new carrier. Your agent or broker can help you investigate this.

What if my group is changing carriers, but there’s no time to vest before I retire?

Sometimes a medical professional close to retirement works for a group that is changing insurance carriers. The group’s agent or broker may be able to negotiate for accelerated vesting, meaning a shorter insured time period for the medical professional to qualify for earned tail coverage.

If I’m not vested, what are my payment options for tail coverage?

While payment options may be available, not all insurers offer the option to pay the premium associated with the purchase of tail coverage in installments. If you are insured with The Doctors Company, the cost of tail coverage can be spread over two years without interest.

Understanding tail coverage helps physicians incorporate insurance planning into their career planning, so they can maintain their focus on delivering superior care.

Laura Archer, CPCU, is the vice president of underwriting for The Doctors Company’s Southeast Region. She has worked in underwriting for 30 years and started her professional liability career in Boston. She has been with The Doctors Company, the nation’s largest physician-owned medical malpractice insurer, since 2011. Archer earned her bachelor’s degree in management at Bryant University. She holds a chartered property casualty underwriter (CPCU) designation and is a licensed agent in Florida.

The guidelines suggested here are not rules, do not constitute legal advice and do not ensure a successful outcome. The ultimate decision regarding the appropriateness of any treatment must be made by each health care provider considering the circumstances of the individual situation and in accordance with the laws of the jurisdiction in which the care is rendered.