What is all this talk about “Tail and Nose Coverage”? These are insurance industry terms thrown around by medical malpractice insurance brokers and underwriters, and they expect everyone to know what they mean. While insurance jargon can be confusing, the underlying concepts are not all that complicated. For now, we will just deal with “Tail Malpractice Insurance,” and provide a few tips on finding the best coverage at the best rate.
Tail Insurance is another name for an Extended Reporting Endorsement, which is part of a claims-made medical professional liability (MPL) insurance policy. As the name indicates, a Tail is an endorsement to an MPL policy. Endorsements modify the policy coverage in some way. In this case, the tail provides permanent insurance coverage and claims defense for any claim reported after the policy has been canceled but where the incident happened while the policy was still in force. Why is a Tail necessary?
The most common reason for adding a Tail is when a physician is retiring. Imagine a physician or other healthcare provider whose 30-year practice is getting ready to close so he or she can retire. Once they close the office, cancel their medical malpractice insurance, and move to their dream home on the beach, they’re finished, right? Not exactly! What if a patient claims negligence and injury from an incident that happened the day before? Or a week before? Or even 2 years before the doctor retired? That retired physician can still be held liable. The solution to that problem is Tail Coverage. In most cases, the tail at the time of retirement is free, if the physician meets certain requirements: Retiring completely from the practice of medicine, has been with the insurance company for 5 years or more, and is age 55 or older. If these requirements are met, the insurance carrier will issue an Extended Reporting Endorsement that is usually permanent.
Another reason for needing a Tail is when a physician has a claims-made policy while working in private practice and then goes to work for a hospital or other employer who will not agree to cover their prior acts as a private practice physician. In this case, the physician would be required to purchase the Tail Coverage when the policy is canceled. If they do not purchase the Tail, there is no coverage for any claim filed after the cancelation date, but the physician would still be liable.
When purchasing Tail Coverage, there are a few things physicians need to know to make sure they are getting the best coverage at the best rate. When canceling an MPL policy, a Tail can be purchased from the current insurance company, but that is not always the best rate. The rule of thumb for calculating the cost of the Tail is two to three times the annual premium at the time of cancelation. This can be quite pricey, and depending on the physician’s specialty, up into the hundreds of thousands of dollars. The alternative is to buy a stand-alone Tail from a different insurance carrier.
Shop for Tail Coverage
Physicians should shop around to find the best deal on Tail Coverage. Working with the consultants at eQuoteMD makes this process simple and efficient. Let eQuoteMD do the shopping! We have access to all the major medical malpractice insurance carriers nationwide for any specialty in any state. Often, the Tail quotes from a different company are 20% less than the incumbent carrier.
Make Sure it’s the Right Coverage
In addition to shopping for the best price, physicians need to make sure they are getting the best coverage available on a Tail. For example, some Tails are limited and not permanent. They may only provide coverage for two to five years. A limited Tail could cause significant problems if a claim is filed after the coverage ends. Depending on the specialty, physicians can be liable for incidents for as long as 20 years when working with children or delivering babies. Often a statute of limitations for a medical malpractice claim extends to two years beyond the “time of discovery,” no matter how many years ago the incident occurred.
Research the Financial Strength of the Insurance Company
Whether buying a Tail from the current insurance company or a stand-alone Tail from a different company, it becomes worthless if the company goes out of business. The number of medical malpractice insurance companies that have failed in the last 10 years is concerning. The financial health of insurance companies is easy to research and confirm, but it may be overwhelming to think about researching the numbers. The consultants at eQuoteMD can help navigate the landscape of the medical malpractice insurance industry. We only work with highly rated companies with solid financial foundations.
Tail insurance is necessary to protect the income and assets of physicians and other healthcare professionals if they have a claims-made MPL policy. Physicians should make sure the insurance company is solid financially, get the right coverage with a permanent Tail, and shop around for the the best deal when purchasing a Tail. eQuoteMD is here to help!