Do You Need Tail Coverage On Your Malpractice Insurance Policy?

One of the complexities of malpractice insurance is that several years can elapse between a patient’s treatment and a claim of malpractice. Even more time will pass while that patient’s suit is settled in negotiations or decided through the court system.

That’s why, depending on what type of medical malpractice insurance you have, you might also need to pay for tail coverage.

From what it is to when to get it, here’s everything you need to know about tail insurance and why you might need to add tail coverage to your malpractice insurance policy.

What is Tail Coverage Malpractice Insurance?

Tail coverage, also called the Extended Reporting Endorsement, is a policy that you add onto an existing medical malpractice insurance policy that’s about to end. It’s liability coverage that protects you if you have a claims-made policy that lapses or you switch insurers.

According to reports published by the AMA, 34 percent of all physicians have had a malpractice lawsuit filed against them at some point in their careers. The physicians with the highest risk of being sued are surgeons and OBGYNS, while those with a lesser amount of risk are psychiatrists and pediatricians.

Yet regardless of specialty, all physicians face a serious issue:

Malpractice claims can be made years after the incident that caused the claim. If you don’t have the right type of malpractice policy in place, you could be on the hook for hundreds of thousands of dollars (or more) in damages for claims made after your policy ends.

Getting tail coverage is a way to protect yourself for an extended reporting period, so you’ll be covered even if the patient files a claim years later. Tail insurance generally stays in effect for an unlimited period of time, offering an added layer of protection that no claims-made policy can provide.

Read the full Physician’s Guide to Malpractice Insurance here.

Do All Physicians Need Tail Coverage?

The statute of limitations on filing a malpractice claim varies by state, and it typically ranges from two to six years.

Because claims can be filed years after the occurrence causing the claim, physicians need to make sure they have medical malpractice insurance at all times. They can do so in one of two ways:

• With occurrence-based malpractice insurance
• With claims-made malpractice insurance + tail coverage

An occurrence policy provides coverage as long as the policy was in place when the cause occurred. Even if a patient files a claim years later when you no longer carry malpractice insurance or carry a different policy, you’ll be covered.

To enjoy the benefits of a claims-made insurance policy, you must have coverage when the claim is made, regardless of whether or not you had a policy when the patient interaction occurred. When claims-made coverage comes to an end, adding tail insurance is a way to ensure that you’ll continue to be covered if and when a patient files a claim against you. It basically converts a claims-made policy into an occurrence-based policy.

If you have occurrence coverage, you do not need tail insurance. If you have a claims-made policy, you do.

Physicians often opt for a claims-made policy over an occurrence policy because it’s cheaper. However, adding tail insurance will cost you.

Why Buy Tail Insurance?

The key reason that physicians get tail coverage is that their claims-made policy is about to end.

But there are other reasons in which it may be necessary:

• Moving to a new state that requires you to switch insurance carriers
• Changing to an employer within your same state that requires you to carry malpractice insurance
• Purchasing a new policy from a different insurance company
• Going to work for a hospital system or practice that will pay for your malpractice insurance coverage
• Starting a solo practice or joining a new group practice
• Merging your solo practice with other physicians
• Leaving your current employer for any other reason, including retirement, disability, or a career change

Any reason that would cause you to end your current claims-made policy, get a new claims-made policy, or drop coverage altogether is a reason to add tail coverage for extended protection.

Read about these 6 Type of Medical Malpractice and How to Avoid Them

How Much Does Tail Coverage Cost?

If you choose the same insurance company with which you had your claims-made policy, the typical tail coverage cost is approximately 1.5 to 2.5 times the annual premium from your original policy. However, this amount varies from policy to policy and is based on several factors:

• The liability limits on your previous policy
• The policy period and how many years it will provide coverage
• The insurance company you choose

Tail coverage generally stays in effect for an unlimited period, but you can choose how long you want the policy to be in effect. Your coverage limits on the original policy will also remain in effect unless you carry lower liability limits on the tail policy.

Many doctors, especially young doctors, face the problem that tail insurance usually requires you to make a lump sum payment rather than paying monthly premiums. The cost can be shocking for physicians that have never purchased tail coverage.

If you have a claims-made policy or expect to have to purchase tail insurance in the future, start obtaining quotes now so that you know how much money to set aside when it’s time to purchase the policy.

You may be able to save a bit on the cost of tail insurance if you purchase a standalone tail policy from a new insurance carrier rather than purchasing it from your current insurance company. You can also save money by purchasing prior acts coverage, or nose coverage, from a new insurer rather than purchasing tail insurance from your previous insurance carrier.

Nose Coverage Is Less Expensive Than Tail Coverage

In some cases, nose coverage is an option if you’re switching to a new carrier. Under this type of policy, the new insurer agrees to cover you for prior acts if the claim is filed while your new insurance policy is in effect. It is a less expensive option than tail coverage, and it’s preferred as long as you can get it.

Nose coverage may not be available to you if you’re moving to a new state. Often, a new policy issued in one state, whether individually or through a group policy, won’t cover prior acts from another state.

It may also not be an option if you become employed by a self-insured hospital or healthcare system. Most self-insured hospital systems will not cover prior acts for incoming physicians.

It’s also not an option for retiring physicians or those making a career change who no longer need to carry malpractice insurance. To get nose coverage, you need to have a new malpractice insurance policy in place. If you no longer need malpractice insurance, the way to extend coverage is with a tail policy.

Physicians entering retirement should check with their previous insurance company before purchasing a tail policy with a new insurer. Some carriers provide free tail insurance to retiring physicians if they had their original policy in place for a significant period of time.

Do Employers Ever Pay for Tail Coverage?

Don’t assume that just because your employer paid for your malpractice coverage they’ll pick up the cost of your tail coverage too. Some employers do, but many do not.

To determine whether or not your employer will pay your medical malpractice tail coverage, refer back to your physician employment contract. The details regarding who is responsible for paying for tail coverage when the contract ends should be specified in the terms of the contract.

Employers that agree to pay for tail coverage often do so as a way to attract experienced, top-quality physicians to their practice or healthcare system. Physicians that have had to purchase tail insurance in the past know how costly it can be, so having an employer agree to pay for tail coverage is an added benefit that can save a physician thousands of dollars when their contract ends.

The Details to Look For in a Tail Insurance Policy

When purchasing tail insurance, there are a few things to be aware of, specifically in regard to policy terms and the limits of liability.

Tail insurance does not provide all of the benefits that a claims-made policy does. There are almost always limitations.

Consent to Settle Provision

Your tail policy may no longer carry a consent to settle provision, which states that the insurance company must obtain your written permission before settling a claim. Without a consent to settle provision, the insurer can settle out of court with a defendant without your consent.

Legal or Attorney Fees

Most malpractice insurance policies have liability limits and provide additional coverage to pay for the cost of legal fees and attorney fees. Tail policies do not.

In a tail policy, legal and attorney fees are often inside the liability limits. This means that legal fees count toward the liability limits on your policy, leaving less money available to pay toward actual damages if you’re found liable.

Regardless of the limits of a tail insurance policy, it’s always safer to have one than to “go bare.”

While some states don’t require physicians to carry malpractice insurance, let alone tail coverage, the following seven states require that you purchase tail insurance to cover you when your current policy ends:

• Colorado
• Connecticut
• Kansas
• Massachusetts
• New Jersey
• Rhode Island
• Wisconsin

Outside of these seven states, even where tail insurance is not mandated by the state government, it may be mandated by your employer. Many hospital systems require physicians to have tail insurance in order to get hospital privileges.

How to Get Tail Insurance

Purchasing tail coverage is easy to do, and you can start the process today by obtaining quotes through LeverageRx.

Provide information about your medical specialty, employer, and current carrier and LeverageRx will obtain and send you quotes from different insurance companies that you can then compare to see which one is right for you. LeverageRx also has experts on staff so you can speak to an agent if you need more information or need more details on policy terms.

Don’t wait until your current policy ends to start thinking about tail insurance.

Patients can file a claim any day and at any time, and the whole point of tail insurance is to prevent a lapse in coverage. To do so, you’ll need to have a tail insurance policy in place before the last date that your current policy will remain in effect.

The bottom line is that you need malpractice coverage for every interaction you had with a patient as well as all past, present and future procedures you were part of.

In addition to protecting you financially, it’s a way to avoid gaps in coverage. In certain states, having gaps in coverage can affect your medical licensing, which can lead to termination of employment.

Like other aspects of malpractice insurance, tail coverage can be complicated, but it’s easy if you have an expert on your side. To find the tail insurance policy that’s right for you, contact LeverageRx to obtain quotes and speak with an agent to help you review your options.