What is Tail Insurance

FAQs

What is “Tail Coverage” All About

Tail Coverage is an “extended reporting endorsement” to us insurance folks. When a claims-made policy has expired an extended reporting endorsement allows the physician to report a claim (and have coverage for that claim) after the expiration date of their policy. When the expiration or cancellation of that coverage occurs, the insurance company provides the insured physician with the obligatory (mandated in most cases by states Departments of Insurance) offer to purchase tail coverage.

Tail premium cost from your current insurance company IS NOT negotiable. Most insurance company filings describe the tail premium calculation as: Manual Rate based on specialty times Maturity Year Factor (aka “step factor”) times Part Time or Newly Practicing discount Factor (if applicable) times Tail Factor (which varies based on “step year”). What that means is five plus years of prior acts means tail premium charge will be minimally 200% to 225%.

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The Claim Reporting Lag Time

Over 90% of Medical medical professional liability claims are reported to an insurance company within 48 months of an “incident”. An incident is what the medical industry calls a bad or unexpected outcomes, surgical complications, misdiagnosis, errors, etc. Because of the risk of a future claim being made against you tail coverage is necessary to protect yourself.

Who is the Right Candidate for Stand-Alone Tail Coverage

Any physician leaving a group practice where the group is obligated to pay tail premium for the departing physician – regardless of where the departing physician will be practicing, new group, solo, hospital employee, etc. In this case the group is the buyer of the product.

Any physician leaving a group practice where he/she is obligated to buy and pay for tail coverage. There are two good reasons not to buy tail coverage from your current carrier:

  1. You are writing the check so don’t pay a penny more than you should.
  2. Segregate your coverage from your old group’s coverage – you may want to ensure your Interest is represented separately from your former group in the event of a claim involving both.

A group practice that is being dissolved or merging with another.Any physician leaving one state and moving to another to practice medicine. Rarely will it make financial sense or will coverage be available in the new state with the option to include “prior acts” coverage over the former state.

“I’m leaving private practice and becoming employed by a hospital!” Congratulations you are becoming part of one of the fastest growing clubs in Healthcare the “I used to be in private practice alumni club”. This is the largest segment of the tail market. Your new employer is probably self-insured (it rarely make sense for a hospital/health system to purchase primary insurance coverage) and is probably not interested in assuming the risk of your “prior acts” into their self-insured arrangement. Sorry, that is a lot of insurance speak – They are willing to insure the risk you create once you are an employee, but they don’t really know what risk you’ve created up until that point. The hospital has become the buyer of your tail coverage and builds the tail cost into their acquisition expense.

Why Buy Tail Coverage at all

In some circumstances it can be financially difficult to comprehend or justify. The fact is you buy tail coverage to protect yourself from the uncertain future financial risk of a claim alleging negligence.

Unless you are never going to practice medicine again, someone in the credentialing department, your new employer, etc. will ask for proof that there is no gap in coverage.

If your current hospital By-Laws (hospital you will be leaving if moving out of state or changing practice locations) are written properly they do NOT say “you have to buy insurance while you are on staff” – well written By-Laws will state, “you are required to have proper insurance coverage to protect yourself and the hospital for any liabilities created while you were on staff and will continue to maintain same level of protection when you leave the staff”. Translation – if you choose to not purchase tail you have violated the medical staff bylaws.

Who Does not Need to Buy Tail Coverage

With a claims-made policy in force, most physicians change insurance companies and the new company covers the physicians “prior acts” aka – nose coverage. Also, many physicians buy malpractice insurance until the end of their career and most insurance companies will provide “free” (not really – you’ve paid for it over the years) tail coverage, provided that you have truly retired and have been insured by the insurance company for at least five consecutive years.

General Information on Malpractice “Tail Insurance”

The following link will take you to an informative white paper on tail coverage published by the Student/Doctor Network http://www.studentdoctor.net/2012/11/what-is-malpractice-tail-coverage/

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