Making heads and tails of tail insurance

When you take a new position at a hospital or medical group, your employer typically covers malpractice insurance. It’s easy to assume that if and when you leave, your employer will continue cover you for a malpractice claim related to events that took place while you were employed.

But that’s not always the case. “One of the most important things to look out for in your contract is whether the hospital will continue to provide coverage for patient encounters that took place while you were in its employ, even once you’ve left,” says Chris Brown, JD, an attorney with the Health Law Firm in Altamonte Springs, Fla.

Many physicians do not understand this. That’s because there are two kinds of coverage: occurrence- and claims-based, explains Andrew Knoll MD, JD, a former hospitalist and principal in the firm of Cohen, Compagni, Beckman, Appler, and Knoll PLLC in Syracuse, N.Y.

“In an occurrence policy, you are covered while you work at the facility where the patient encounter took place, and you continue to be covered if there is a claim against you—even years later—although the policy has expired and premiums are no longer being paid,” Dr. Knoll says.

In claims-made coverage, on the other hand, the insurer covers only incidents that happened and claims that were filed while the physician was still on the insurance policy, similar to car or homeowners’ insurance. “When the premiums are no longer paid, there is no more coverage,” Dr. Knoll says. “Your new policy also won’t cover alleged malpractice that took place when you were insured by another company.”

The solution, called “tail coverage” (also known as an extended reporting period), is additional coverage an insured can purchase once a claims-made policy is cancelled or expires and is not renewed, says Dr. Knoll. Purchased from the original insurance company, it protects against subsequent claims by continuing to inure physicians even after they have left the original practice. Essentially, he explains, “it converts claims-made to occurrence policy.”

“You want to avoid paying for tail insurance because it’s very expensive—typically two years’ of mature premium cost,” emphasizes Mr. Brown. There is a lot of variability not only from state to state, but also between larger hospitals or hospital consortiums and smaller hospitals or physician groups.

“If your employer won’t assume the costs of tail coverage, that’s a major pitfall and you should consider carefully if you really should take that position,” says Dr. Knoll. Tweet this.

But if this is the plum position you’ve always wanted and the absence of tail insurance is the only drawback, look into tail coverage yourself. Carefully inquire about state requirements on malpractice limits, and investigate the cost with your current and future employers’ carriers.

“Tail coverage is one of the most important components of your contract, with major long-term consequences, so review your contract and make sure the terms are clearly spelled out,” warns Mr. Brown. “And don’t be afraid to negotiate.” Tail coverage, he adds, is worth fighting for.