Tail coverage is expensive, but it provides peace of mind

Q. I'm a 50-year-old family physician with virtually no assets, thanks to a recent divorce and the need to put my three children through college. I'm considering leaving my practice within two years. If I don't purchase tail coverage, I can save myself about $15,000. Should I save the money?

A. It depends on how much risk you're willing to tolerate. A claims-made policy, the most common form of malpractice insurance, has rigid limits: You're covered only if the policy is still in force when the alleged malpractice occurs and when the insurer has been notified that a claim has been or may be filed. An "extended reporting," or "tail," policy protects against claims filed after your coverage ends, as long as the incident took place during the policy period.

Provided certain requirements are met, carriers often furnish free tail coverage for physicians who've been insured continuously for at least five years (longer for some companies), retire completely from the practice of medicine, become disabled, or die. Otherwise, tail coverage can be quite expensive, often as much as two years' regular premiums.

Your exposure is probably limited if you're a primary care physician with a good track record, have solid rapport with patients, and refer your high-risk cases to specialists. But you are essentially rolling the dice. Remember, without tail coverage, you'd have to underwrite the legal fees for your defense out of your own pocket in addition to any judgment entered against you.

The fact that you have few assets and no insurance coverage may dissuade some plaintiffs' attorneys from filing suit, since the chances of recovery for their clients are small. It's also likely that several defendants would be named in any lawsuit, and the plaintiffs would aim at the doctor or hospital with the deepest pockets.

Still, it's dangerous to count on that. Some portion of liability may be assigned to you even if the bulk of the judgment is rendered against another defendant. There is always some property a clever attorney can attach. In many states, that could include your house, cars, and bank accounts. While certain kinds of pension plans, trusts, and other assets aren't attachable, the list is very restricted. Finally, if a doctor is an employee, the plaintiff may garnish wages.

So the downside of going bare can be pretty steep. Unless you have a very strong tolerance for the risks involved in self-insuring, I'd advise any doctor to check out the availability of free tail coverage or, if need be, to bite the bullet and pay the premium. Some insurers will allow installment payments.