Tail Coverage

Medical malpractice insurance generally falls into four categories:

• Claims made
• Occurrence
• Claims paid
• Tail coverage

The most common type of policy is the claims-made type. This policy covers acts of malpractice that occur and are reported to the insurance carrier during the policy time period. A practitioner may continue this policy for many years; however, at some point he or she may want to switch insurance carriers or may have a change in career including retirement. Then the practitioner must purchase “tail” coverage for liability protection. Regardless of the reason, when a practitioner terminates a claims-made policy, he or she must purchase tail coverage for the period during which the former policy was in place.

A tail coverage policy extends insurance coverage for acts of malpractice that may be reported beyond the policy coverage date of the claims-made policy. The practitioner is then covered by his tail policy if he faces a malpractice claim years after the claims-made policy was in effect. When purchasing a claims-made policy, the insured should look for a guaranteed right to purchase tail coverage. The price of tail coverage varies with specialty, location, and length of practice. Obviously, the further back in time the tail policy must cover, the more expensive it will be to purchase. Recent market conditions surrounding the costs of malpractice insurance have made tail coverage difficult to obtain for some high-risk specialties and costs for such coverage have skyrocketed.

Occurrence coverage policies insure for malpractice incidents that occur while the policy is in effect, regardlessof when an actual claim may be made. Therefore, tail coverage is not needed when this type of insurance coverage is terminated.

Claims-paid coverage is often used by trusts. Premiums are based on claims settled during previous years and projected for the future.

The coverage is similar to claims made, with different considerations for what is considered a claim or a formal complaint. Regardless of their differences in legal nuances, a claims-paid policy requires the insured to have tail coverage to protect against future litigation that would arise out of acts during the years the claims-paid policy was in effect.

Obviously, if an individual practitioner is not prudent enough to be protected by an occurrence policy, under any other scenario he or she must at some point purchase tail coverage to protect oneself.