Maintaining seamless malpractice coverage is a critical issue for all physicians. The evolving health care industry with its consolidations, buyouts and changing delivery models continues to create a need for physicians and physician groups to purchase extended reporting period or “tail” coverage for their current medical malpractice policies.
The explosion of hospitalist groups, locum tenens and physician staffing companies combined with an overall physician workforce interested in more transient and flexible work environments has resulted in a market for individual doctors and groups seeking their own extended reporting period or tail coverage policies. Here are 5 things that are good to know when your physician client needs tail coverage:
#1 In years past, there were few, if any, options when a need for purchasing a tail policy arose. Now there are many carriers that are A- or better rated by AM BEST that offer stand-alone tails. It’s worth shopping around before settling for the incumbent carriers’ tail offer – especially if the client’s current policy has an incident-sensitive claim trigger. Very often lower cost tails with identical or like terms are available to your clients.
#2 Durations of tails can vary from one year up to unlimited. Since statutes of limitations for malpractice claims vary by state, many doctors can opt to save money and purchase a shorter length tail policy that runs concurrent with the state statutes. However, they do this at their own risk since there are often exceptions to statute limitations. But many doctors ultimately decide their risk is low or non-existent and purchase shorter tails.
#3 Physicians currently employed or contracted by any of these groups typically face one of two scenarios when choosing to leave the group: The group is contractually required to provide the departing physician with tail coverage or maintain continuing coverage for future claims on the group policy; or the physician is required to purchase tail coverage or obtain prior acts (nose) coverage from a successive insurance carrier.
#4 In the case where the physician is contractually covered by the group he/she is leaving, there is typically no need to worry about their tail exposures. He/she can get a new medical professional liability policy at first-year claims made premiums rates or join a new group with no worry about their previous exposures. There is one big drawback to this that can occur if a group ceases to exist and doesn’t purchase a group tail policy. This can happen when a group disbands or goes under financially and has no assets left to pay the 150 to 200 percent of their annual premium to purchase the tail. The departed docs in this case are often left with no alternative but to seek out their own tail policy. This happened recently with a large hospital-based radiology group that lost their hospital contract and went belly up. All of the current and former doctors who worked for the group were able to obtain their own tail policies at a reasonable cost.
#5 A doctor may be required to either purchase the tail coverage being offered by the group’s current insurance carrier or seek a stand-alone policy for tail coverage elsewhere. Often a departed doctor has little or no negotiating ability with the group’s carrier and they are offered only one option – unlimited.
The good news is that stand-alone tail coverage is readily available in the medical malpractice insurance marketplace. Agents who specialize in medical malpractice insurance will be familiar with these scenarios and can help physicians look at options to find the right coverage at the right price.