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Covering Your Back

Posted By Administration , Tuesday, November 17, 2015

Top Tips About Medical Malpractice Tail Coverage

By: Brian Bowles, MAOPS Executive Director


The following information is not provided as legal advice. It is simply a guide to assist you and make you aware of some issues you may face regarding medical liability insurance and tail coverage. You should always consult with an attorney with expertise in this area before making final decisions.

A major consideration for physicians who are retiring or changing employment situations is protection from medical liability claims that occurred in the past. When you switch jobs, your new coverage may not necessarily cover you for your prior acts. When you retire, protection from claims that might come back to haunt you from the past is necessary. Those contemplating retirement, or changes in employment, need to be aware of the type of medical liability insurance they have and some caveats regarding tail coverage. It is also extremely important to be proactive when initially purchasing malpractice insurance as it can save you tremendous frustration later on. The following is not an exhaustive list of questions to think about, rather it’s a starting point for necessary conversations with liability insurance carriers when purchasing insurance, retiring or changing employers.

Question: Do medical liability polices include tail coverage?

Answer: Most do not. Two types of policies exist: 1) occurrence-made; and 2) claim-made. Occurrence-made polices are rarely offered (by employers or medical malpractice insurance companies) these days, but they are still available. These polices are expensive, because they cover the insured for any malpractice claim that occurs while the claimant was covered by that insurer, regardless of if they are still with the insurer at the time of the claim. In short, tail coverage is “built in” to these policies. A claim-made policy (the most common type today) has the advantage of being lower in cost, but only covers the insured while they are an active policy-holder. Therefore, if you switch employers, or retire on Jan. 1, and drop your coverage with company A, you are not protected from any prior acts occurring while you were under that coverage. This is why you need to purchase tail coverage. Basically it’s a “pay now or pay later” scenario.

Question: My medical liability offers free tail coverage when I retire. I’m covered, right?

Answer: Maybe. The free tail coverage many companies provide covers you if you stay retired. If you go back to work, many companies have a provision which terminates the tail coverage leaving you unprotected. Some companies say they provide permanent tail coverage to policy holders, so even if you go back to work, you will be covered. If you are told this, be sure it is in writing and be sure an attorney verifies this for you.

Question: If I am changing jobs, won’t my new employer-provided policy cover me for tail occurrences?

Answer: Probably not. Your new coverage is for events during your employment with the new employer. Why would they want to pay for coverage for you with a past employer? They probably won’t assume that responsibility, so while you are covered for incidents while working for them, you may not be covered for prior acts. However, it never hurts to try and negotiate this into your employment contract.

Question: How do I know if I am covered for events associated with my previous employer?

Answer: Ask them before you retire or leave. Often, hospitals have provisions in place to protect them and their employees. But, it is your responsibility to know the policy and ask the right questions. Be sure to get the answer in writing, and it would be wise to have a trusted attorney assist you in reviewing the provisions in your policy.

Question: What if I am self-employed? Am I covered when I retire?

Answer: If you, by chance, had occurrence-based insurance, tail occurrences will be covered. If you privately purchased claim-made medical liability coverage (the most likely scenario), you may very well be offered free tail coverage when you retire. Be sure to ask about this when you BUY the policy. Also, ask if the coverage is terminated if you decide to go back to work. This is a common and problematic practice of medical liability companies. You are fine if you stay retired, but the second you go back to work (as a physician), you are unprotected from any previous claims and must purchase tail insurance. This could also include charity work, consulting, etc.

Question: What if I want to provide charity care for no compensation during my retirement? Will I lose my tail coverage?

Answer: First, regardless of the type of care you provide, you need to protect yourself from lawsuits. You can still be sued even though you were providing free care. Check with your insurance provider and see what they recommend. Chances are you can have your old policy reactivated, or they may simply allow you to keep the free tail coverage. It will depend on the company you are dealing with and your specific situation. But, have the conversation BEFORE you provide the charity care.

Question: What good is free tail coverage when I retire if they terminate it if I go back to work?

Answer: For one, it is free. Tail coverage is very expensive to purchase (220% to 350% of the current malpractice premium). So, if you stay retired, it is a very nice benefit for being a loyal customer. However, many physicians never fully retire. They often provide services for free for charities or work part-time at an urgent care facility or fill in occasionally as a locum tenens. Any of these situations require medical malpractice insurance, because you are at risk of a lawsuit. If it is purchased from the same company you have always used, chances are you can negotiate with them to keep the tail coverage they have provided you. However, if you switch companies or are employed by a business that uses another company, in essence, you have “switched allegiance” and are no longer a customer of your original provider. Remember, the free tail insurance was provided for being a loyal customer. Once you go back to work and are a customer of another company, the original company really has no incentive to protect you for free. Sound unfair? Maybe. But, you have to remember that insurance companies, like all businesses, need to make a profit. It doesn’t make good business sense to provide free protection for another company’s customer. This is also where good research early in your career pays off. If you had occurrence-made insurance, your tail is covered, but you paid the price throughout your career. If you had claim-made insurance, you saved money throughout your career, and have to pay the price now.

Question: So how do I protect myself for past occurrences if I decide to go back to work, even part-time?

Answer: It depends on the situation. Let’s look at four scenarios, assuming you had claim-based insurance.

1) Retired private physician returning as a private physician (part-time or full-time)
Answer: Simply approach your former malpractice provider and explain your specific situation. Negotiate a rate that fits your situation (if you are part-time, the rate shouldn’t be the same as if you are full-time). Also, be sure to ask about tail coverage. A reputable company will keep the free tail coverage for you or will simply convert your old policy back to an active policy with the same tail coverage provision for when you retire.

2) Retired private physician returning as an employed physician
Answer: Most likely your employer is using another malpractice provider, especially if it is a hospital system. Most private malpractice companies will terminate your free tail coverage once you go back to work. This means you either have to purchase the tail coverage at great expense or be left unprotected. You may be able to negotiate with your employer to pay for the tail coverage. You may also be able to negotiate with your previous provider. But, most likely, this will be your financial responsibility. Also, don’t assume that “if they don’t know I am working, I still have tail coverage.” Not true! If a claim is filed, the insurer will find out you were employed and termination of the tail coverage will still occur from the time you went back to work.

3) Employed physician returning as an employed physician
Answer: Most employers have policies for employees that provide tail coverage after the employee leaves. This is as much to protect the employer as the employee, but none-the-less, you are covered. Be sure to ask about this and get the answer in writing. If not covered, you will have to purchase tail coverage from a reputable company.

4) Employed physician returning as a private physician (or becoming a private physician)
Answer: This scenario is similar to the one above. Your previous employer probably has tail coverage for you. Still, get it in writing. When you purchase liability insurance for your private practice, be proactive and ask the right questions about tail coverage. Chances are, if you have retired and are coming back, you may truly retire in the near future, so it is very important that you have a policy that protects you in retirement. Take care of the tail coverage issue while you have this new opportunity.

One last thing to consider: “retired” means you are no longer working and deriving income as a physician. Be careful not to confuse this with “cutting back.” Many physicians feel that the one day of the week they work is more like a hobby to “stay in the game” and keep their skills fresh. BUT, when it comes to medical malpractice insurance, you are still working. You still need coverage, including tail coverage.

In summary, while Missouri does not require all physicians to carry medical liability insurance, it is not a wise decision to be unprotected. While claim-made insurance is usually cheaper initially, it does not include tail coverage. With the mobility in today’s physicians, frequent job changes could result in several periods where the physician is not covered by medical malpractice. It is recommended that tail coverage be purchased in order to protect your assets.

Occurrence-made insurance is more expensive, but it does offer the peace of mind of protection regardless of circumstance. It is less readily available than claim-made insurance, but there are companies that do offer it. It would be wise for the physician to look at both types of insurance from reputable, financially sound companies and determine what coverage best fits their situation. And remember, its either “pay now or pay later,” and tail coverage is basically an added endorsement to convert a claim-made policy into an occurrence policy.

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