Whether carrying medical malpractice insurance on your own as a private practice physician or as an employee of a group or hospital, tail coverage should be a top priority when considering any changes to your coverage. The topic of tail coverage typically raises a few commonly asked questions from physicians:
- What is tail coverage?
- How many years can a tail policy cover?
- When is tail coverage necessary?
- How much does tail coverage cost?
What is tail coverage?
The technical name for a tail is, Extended Reporting Period (ERP). It is actually an endorsement that is added to a medical malpractice insurance policy at the time of cancellation. Tail coverage only applies to claims-made policies, not occurrence policies. Since most policies written nationwide are now claims-made, it is important that physicians understand when a tail is necessary and the terms under which tails can be acquired (which is discussed in more detail below).
How many years can a tail policy cover?
This endorsement allows for claims to be covered for a specific period of time even though the original policy is no longer in force. The period of time can be limited to 2, 3, or 5 years, up to as long as 10 years. Or a tail can be indefinite or “Perpetual,” meaning there is no limit on the number of years claims can be covered.
When is tail coverage necessary?
Almost all claims-made policies include a provision for malpractice tail coverage. When a claims-made policy is cancelled, or not renewed by a physician or group, the insurance carrier will offer a tail quote. These quotes for tail coverage must be accepted and paid for, or declined within a limited period of time, such as 20 – 30 days (or more) from the cancellation date. The coverage is optional and can be expensive, but it is highly recommended that physicians choose to purchase the endorsement to protect themselves from potential claims that may arise as a result of prior acts.
It should be noted that most policies provide a free tail for retirement, death, or disability. It is imperative that you know what the requirements are for these free tails. You should not assume that it is automatically included in every policy. Speak to your broker about the specifics and read your policy.
Another caveat to be aware of is that the medical malpractice insurance companies usually do not offer tail coverage if a policy is cancelled for non-payment. So if you are making a change, notify your insurance company in writing so that you do not lose this option. If you let it lapse and find out you need to purchase a tail, it might just be too late.
How much does tail coverage cost?
A good rule of thumb for estimating the cost of tail coverage is to double the amount of the premium at the time of cancellation. The typical price ranges from 150-300% of the underlying premium, not including discounts. Some companies charge a higher rate if the losses have been severe. The formula used by each medical malpractice insurance company is unique and will be clearly stated in the policy language. If it isn’t spelled out completely, contact a broker or insurance company representative to get the details.
When looking for a new medical malpractice insurance policy, make sure you know what the provisions for tail coverage are and what the cost will be. eQuoteMD representatives are able to assist and educate physicians as well as save money on tail coverage. Start by contacting eQuoteMD today and requesting a free, no-obligation quote.