Answers to the most common questions regarding tail coverage in medical malpractice insurance
In last week’s blog post, we discussed tail insurance very broadly. As previously mentioned, tail insurance is required upon cancellation of a Claims-Made insurance policy. Since Claims-Made coverage triggers based on when a claim is made against you, the tail policy (also known as an extended reporting period or ERP) extends the reporting period for future filed claims. Essentially, tail coverage provides protection for medical malpractice claims that are reported after your policy is cancelled.
Here are some common questions regarding tail insurance along with answers/thoughts for you to consider.
How is tail premium calculated?
Tail insurance can be a costly expense. Generally, it is 1 ½ to 2 times your annual premium. Every insurance carrier has their own “tail factors” based on their underwriting guidelines and actuarial rules, so you may see a range in tail costs by carrier. A good rule of thumb is to plan for 2x your premium, but you can ask your agent for a quote well in advance of your policy cancellation to get a better idea of what to expect.
There are, however, a few ways in which you may qualify for free tail insurance. Most carriers offer free tail for death, disability, and retirement (usually there is an age minimum). Some carriers offer free tail if you move out of state or if you have been insured with them for a consecutive number of years (Example: free tail after being insured for 10 years, 20 years, etc.). Again, each carrier has their own rules.
How long does my tail cover me?
Tail insurance can be limited or unlimited. It could be a 1-year tail (giving you only 1 additional year of coverage), 2 years, 3 years, 10 years, or an unlimited tail. Rates will be different depending on the length of coverage.
What limit will I have? Can I increase my limit if I want more coverage?
Your tail policy will be quoted at the same limit as your Claims-Made insurance policy, unless you request otherwise. Most carriers will let you reduce your tail limit (which would save you a bit of money), but it’s generally not advisable to do so; however, most carriers will not let you increase your tail limit – even if you want more coverage. If your policy limits fluctuated during the lifetime of your Claims-Made policy, generally the carrier will only let you obtain a tail policy at the highest limit held within the last 5 years of insurance.
Can I just buy a 2-year tail to cover me until the statute of limitations runs out?
Yes, it is possible for you to buy a 2-year tail, but it may not be wise to do so. Statute of limitation laws vary by state, and although these laws set a time limit on a plaintiff’s right to file a medical malpractice lawsuit, it’s not so simple. There are 2 common exceptions to the law that allow a patient to file a malpractice case beyond the standard window of time: 1) Date of Discovery, and 2) Age of Majority / Issues involving minors.
The first exception allows the statute of limitations to be extended until the patient discovers that he/she was a victim of medical malpractice or reasonably should have discovered the malpractice. The second exception allows for an extension until a minor child reaches the age of majority. In both of these instances, a 2-year tail may not be sufficient time to protect you for any future filed claims.
Do I really need to buy tail, if I've never been sued?
Although we’ve said that tail insurance is “required”, you can make the choice not to buy it; however, your malpractice insurance carrier has a legal obligation to offer it to you. If you choose to forego tail insurance, you are essentially uninsured.
I work for a group/network. Won't they take care of my tail for me?
In an ideal scenario, you have already negotiated the terms of your tail insurance with your employer before signing any employment contract. Hopefully you’ve determined if tail insurance will be required upon your departure from the group and if so, who will be responsible for buying it. If, however, you have not worked this out with your group beforehand, you’ll need to address all of these concerns promptly. If the group will be purchasing your tail insurance for you, be sure to get a copy of the endorsement for your files. Don’t just assume that your tail insurance will be taken care of.
What happens if I just go bare?
If you are uninsured or “go bare”, you are personally responsible for any claims that are filed against you. Consider the fact that not only are you footing the bill for any potential losses, but you are also responsible for claim administration (hiring a TPA or defense attorney, paying court fees and related defense costs, etc.). For most providers, tail insurance offers peace-of-mind after a long, successful career in medicine. It would be unfortunate to take a financial or reputational hit that could have otherwise been prevented.
Do I have to buy tail every time I switch malpractice carriers?
Usually not. Most malpractice insurance carriers offer prior acts or “nose” coverage, which allows you to carry forward your current policy retroactive date – transferring liability to the new carrier for any potential claims for services provided back to that date. In some instances, you may have to tail out to make the switch (especially if you are switching because you are changing jobs, and your former employer requires that you buy tail) but be sure to ask your agent what your options are.
Can I shop around for tail quotes?
Yes. Many carriers now offer “stand-alone tail” policies, which means they are willing to offer you a tail policy covering you for your prior acts, even if they were not the company that you were originally insured with. Talk to your agent about options for tail to make sure that you are looking at quality coverage options and not just the cheapest price. Tail insurance does not expire and cannot be cancelled by you or the insurance carrier who issues it, so it’s important that you buy from a reputable, financially stable company.
How long do I have to buy it?
Buying tail coverage is a one-time purchase and payment is usually required promptly after your policy cancels. Most tail quotes are only good for 30-60 days and once the quote expires, you cannot have it reissued. It’s important that you plan ahead for the purchase of your tail insurance and begin considering outside finance options, if necessary. If you miss out on the opportunity to buy your tail, talk to you agent about other options. It may be possible to get coverage from the secondary market, but understand that coverage will likely be limited and the price will probably be much higher (if available, at all).