Does your employer provide your medical malpractice insurance coverage? Are you looking for new employment? Are you in the market to purchase a professional malpractice insurance policy? Are you planning to retire soon?
If you answered “yes” to any of these questions, you likely will confront the concept of “tail” insurance at some point in your medical career.
Now is the time to dust off your employment agreement and professional liability insurance policy and review what happens in the event a lawsuit is filed against you after you leave your current employer. This means paying special attention to whether your professional liability insurance policy provides for claims-made or occurrence-based coverage, and, if it’s the former, who is responsible for purchasing tail coverage.
When Do I Need Tail Coverage?
Tail insurance issues frequently arise when a physician leaves his or her place of employment, whether due to switching jobs, retirement, or a buyout of a physician’s ownership interest. If the physician is leaving an employer that has claims-made professional liability insurance, the physician’s insurance coverage might not be seamless. Instead, tail or similar coverage is required.
Claims-made coverage protects a physician for professional negligence, as long as a two-part test is met: First, the physician must have the claims-made coverage in place when the negligent act occurs (with employer No. 1); second, the physician must be covered by the same carrier when he or she is notified of the claim while employed by employer No. 2. If either test is not satisfied, the current claims-made insurance policy will not provide coverage to the physician in the event a lawsuit is filed for an act of negligence that took place while employed by employer No. 1. Alternatively, some employers offer “nose” coverage from its insurance carrier, which will cover negligent acts that might have occurred during your current job. The vast majority of professional liability insurance policies written for medical practice groups are for claims-made coverage.
If, however, an employer has occurrence-based professional liability insurance, the departing physician’s insurance coverage is seamless and no tail insurance is required.
Here is a common example of what happens when a physician leaves an employer with claims-made professional liability coverage:
An employer maintains claims-made professional liability insurance coverage for its physicians with ABC Insurance Co. A physician decides to leave his or her current employer and accepts employment by a new employer, which maintains claims-made coverage with XYZ Insurance Co.
Within a few months of the physician’s new employment, a medical malpractice lawsuit is filed by a patient for medical treatment the patient received when the physician was employed by the former employer. By leaving the former employer, the departing physician automatically fails the two-part test for claims-made coverage, as the second prong is not satisfied. Therefore, even though the physician has liability coverage through the new employer, this insurance policy will not cover the lawsuit described above.
Unless the physician has tail insurance (or nose coverage) to cover lawsuits related to the former employment, a gap in liability coverage will exist. If claims-made insurance is the benefit you have received in your employment agreement, it is imperative that you understand that tail coverage is necessary when you leave.
However, if a physician leaves and a) is subsequently employed within the same state and b) stays insured by the same insurance carrier, then the insurance carrier will provide continuous coverage and no tail insurance policy is needed.