Malpractice Consult: When you need tail coverage

April 4, 2008

What to do before your claims-made medical liability policy expires.

Key Points

Most malpractice insurance today comes in the form of claims-made coverage, meaning that the insurance carrier will only cover a claim that is filed while the policy is in force. Claims-made malpractice coverage differs from occurrence coverage, which protects against all incidents that occur during the policy period, regardless of when the claim is brought against the physician.

Medical liability insurance policies generally specify that a claim is "made" when the physician is notified that a patient is considering a malpractice suit and the physician, in turn, informs his or her insurance carrier.

As long as you continuously renew a claims-made policy, you'll be covered for incidents that took place in previous policy years, back to when that policy began. If you change carriers, however, or retire from practice, you'll no longer be covered for events that transpired while the policy was in force-unless you purchase some form of tail coverage.

Tail coverage essentially turns a claims policy into an occurrence policy, so that all claims related to incidents that took place during the policy period will be covered regardless of when the claim is made. Almost all insurance carriers offer tail policies. However, they can be quite expensive. Some insurance companies will give you free tail coverage if you've been with the company for a certain number of years and are retiring from practice.

Another way to ensure continued liability coverage is to obtain "prior acts" coverage, also referred to as a "nose," from your new insurer. Prior acts coverage-which, not surprisingly, you're more likely to get if your claims history is benign-will make your new coverage retroactive to whatever date is set forth in the policy. Usually, the more retroactive coverage you get, the higher your premium.

If you're an employed physician, your employment agreement should specify who will be responsible for retroactive liability coverage after the employment relationship ends. As a practical matter, employers should agree to provide what amounts to tail coverage because if an employed physician is no longer covered, the plaintiff will simply hold the employer vicariously liable for the acts of their former employee.

If you have a claims-made policy and decide not to purchase either tail or prior acts coverage, you can minimize your exposure by putting your carrier on notice-before your policy expires-as to every potential legal action. That means informing the carrier, in writing, of all requests for records you've received from attorneys or patients that might be indicative of pending claims, every bad outcome, and all expressions of patient dissatisfaction. If you provide written notice to the carrier, you can argue that the claim was "made" during the policy period and therefore should be covered.

It's a good idea to report possible claims to a new carrier, too, because even if that carrier agrees to provide prior acts coverage, that coverage may not apply to claims that you knew about-or should have known about-prior to purchasing the new coverage.

The author is a health law attorney with Adelman, Sheff & Smith in Annapolis, MD, and Washington, DC. He can be reached by e-mail at aadelman@hospitallaw.com
. This department deals with questions on common professional liability issues. We cannot, however, offer specific legal advice. If you have a general question or a topic you'd like to see covered here, please e-mail it to memalp@advanstar.com
. You may also fax your question to us at 201-690-5420, or send it to Malpractice Consult, Medical Economics, 123 Tice Blvd., Suite 300, Woodcliff Lake, NJ 07677-7664.