Deconstructing the Malpractice Insurance Tail

Physician Writing on ChartIf I purchase a claims-made policy do I have to buy a malpractice insurance tail?

The agents and brokers at MyMedicalMalpracticeInsurance.com are asked this question multiple times per day. The answer always is: it depends.

The truth is that a physician should always know his or her options no matter what type of policy he or she has, and buying a malpractice insurance tail is not always required. Because of the high cost of purchasing a tail, it is important to look at all of the options. In addition, because there is very high employee turn-over in medicine, at some point in your career you will probably need to consider the purchase of a tail. This article will highlight one of the instances in which purchasing a malpractice insurance tail can be avoided.

Making the Case for Prior-Acts Coverage

As we learned in our previous post on malpractice insurance tails, a prominent feature of a claims-made policy is the retroactive (or “retro”) date. This date is key because it clearly identifies the date that coverage begins. Any professional services that are provided after the retro date are covered in case a claim was to arise. The cost of a claims-made policy reflects the importance of this retro date; the farther away you get from the retro date the more expensive your policy becomes until about year five (5) at which point the cost of coverage levels-off.

Let’s say that your dream is to own your own practice and that you have decided to leave your current job. The practice manager will provide you with information regarding your current insurance company and the cost of a tail. At this point you can pay the malpractice insurance tail (usually 2X the expiring premium) or you can have your new insurance company cover your prior acts and provide you with the same retro date as your current policy. The new insurance company agrees to defend you against any claim brought against you from the time you worked at the previous practice and also provides coverage in case a claim is made for services performed at the new practice. No matter where the claim arises from, you are covered.

Cost of Prior Acts

Because your new policy includes prior acts, you should expect to pay more for ongoing coverage than you would have if you had purchased a malpractice insurance tail and started over with a first year claims-made policy. However, since you avoided paying a costly malpractice insurance tail you are probably ahead in the long-run.

Feel free to contact the experts at MyMedicalMalpracticeInsurance.com to discuss all your options.

Next up…The Stand-Alone Tail