A 28-year-old pediatrician working in a large group practice in California found a new job in Pennsylvania. The job would allow her to live with her husband, who was a nonphysician.
On her last day of work at the California job, the practice’s office manager asked her, “Do you know about the tail coverage?”
He explained that it is malpractice insurance for any cases filed against her after leaving the job. Without it, he said, she would not be covered for those claims.
The physician (who asked not to be identified) had very little savings and suddenly had to pay a five-figure bill for tail coverage. To provide the extra malpractice coverage, she and her husband had to use savings they’d set aside to buy a house.
Getting tail coverage, known formally as an extended reporting endorsement, often comes as a complete and costly surprise for new doctors, says Dennis Hursh, Esq, a health care attorney based in Middletown, Penn., who deals with physicians’ employment contracts.
“Having to pay for a tail can disrupt lives,” Hursh said. “A tail can cost about one third of a young doctor’s salary. If you don’t feel you can afford to pay that, you may be forced to stay with a job you don’t like.”
Most medical residents don’t think about tail coverage until they apply for their first job, but last year, residents at Hahnemann University Hospital in Philadelphia got a painful early lesson.
In the summer, the hospital went out of business because of financial problems. Hundreds of medical residents and fellows not only were forced to find new programs but also had to prepare to buy tail coverage for their training years at Hahnemann.
“All the guarantees have been yanked out from under us,” said Tom Sibert, MD, a former internal medicine resident at the hospital, who is now finishing his training in California. “Residents don’t have that kind of money.”
Hahnemann trainees have asked the judge in the bankruptcy proceedings to put them ahead of other creditors and to ensure their tail coverage is paid. As of early February, the issue had not been resolved.
Meanwhile, Sibert and many other former trainees were trying to get quotes for purchasing tail coverage. They have been shocked by the amounts they would have to pay.
How tail coverage works
Medical malpractice tail coverage protects from incidents that took place when doctors were at their previous jobs but that later resulted in malpractice claims after they had left that employer.
One type of malpractice insurance, an occurrence policy, does not need tail coverage. Occurrence policies cover any incident that occurred when the policy was in force, no matter when a claim was filed – even if it is filed many years after the claims-filing period of the policy ends.
However, most malpractice policies – as many as 85%, according to one estimate – are claims-made policies. Claims-made policies are more much common because they’re significantly less expensive than occurrence policies.
Under a claims-made policy, coverage for malpractice claims completely stops when the policy ends. It does not cover incidents that occurred when the policy was in force but for which the patients later filed claims, as the occurrence policy does. So a tail is needed to cover these claims.
Physicians in all stages of their career may need tail coverage when they leave a job, change malpractice carriers, or retire.
But young physicians often have greater problems with tail coverage, for several reasons. They tend to be employed, and as such, they cannot choose the coverage they want. As a result, they most likely get claims-made coverage. In addition, the job turnover tends to be higher for these doctors. When leaving a job, the tail comes into play. More than half of new physicians leave their first job within 5 years, and of those, more than half leave after only 1 or 2 years.
Young physicians have no experience with tails and may not even know what they are. “In training, malpractice coverage is not a problem because the program handles it,” Mr. Hursh said. Accreditation standards require that teaching hospitals buy coverage, including a tail when residents leave.
So when young physicians are offered their first job and are handed an employment contract to sign, they may not even look for tail coverage, says Mr. Hursh, who wrote The Final Hurdle, a Physician’s Guide to Negotiating a Fair Employment Agreement. Instead, “young physicians tend to focus on issues like salary, benefits, and signing bonuses,” he said.
Mr. Hursh says the tail is usually the most expensive potential cost in the contract.
There’s no easy way to get out of paying the tail coverage once it is enshrined in the contract. The full tail can cost five or even six figures, depending on the physicians’ specialty, the local malpractice premium, and the physician’s own claims history.