Physicians often wonder if they should continue to pay for full prior acts coverage going back more than a couple of years. The statute of limitations for a medical malpractice claim in most states is two years from time of discovery. If the statute of limitations has run out, they reason, why pay for medical malpractice insurance coverage unnecessarily? This same question is raised frequently when a doctor or group is considering whether or not to purchase Tail Coverage when cancelling a policy. For several reasons physicians should always buy full prior acts coverage when available and purchase a tail when in a situation where prior acts coverage is not offered.
Of course buying coverage including full prior acts coverage back to your retroactive date is more expensive than buying a first-year policy, but it’s not as bad as you might think. First, most medical liability insurance companies offer stepped up increases over 4 or 5 years, so the premium rate goes up gradually and not all at once. A typical policy will offer a first year rate at 35% less than the rate for full prior acts, and then the premium steps up each year until it reaches the “mature” rate. Usually the 4th or 5th year is considered a “mature” rate that will remain level whether your retroactive date is 5, 6 or even 20 years back.
What Does This Look Like In Real Dollars?
Take a Family Practice or Internal Medicine doc paying $10,000 per year for $1M/$3M liability limits with a retroactive date in 1996. He could drop his prior acts coverage and start over with a first-year policy for around $3,500. But if he received a claim from the prior year or 10 years ago, he is bare. The risk is not worth the savings, especially in the lower rated specialties.
Physicians will sometimes claim that because the statute of limitations has passed on any incident they are aware of, that they are safe. Not true!
The statute of limitations for medical malpractice claims varies from state to state. In Missouri, for example, a medical malpractice claim must be filed within 2 years of the act or omission, but there are several exceptions to this rule. For example, with surgery, if a foreign object is left in, the time is extended to 2 years after the discovery of the object. Also, there is an exception for children that allows 2 years after the minor’s 18th birthday. The long period of time that minors have to file a claim is one of the reasons that premiums are so high for OB/GYN medical malpractice insurance. Some states allow for extensions up to 10 years under certain circumstances. Again, each state will have its own laws, but you can be sure that if there’s money in it a plaintiff’s attorney will find a way to file the medical malpractice insurance claim.
The Doctors Belief of “Nothing Will Happen To Me”
One of the most surprising reasons physicians justify not buying full prior acts or tail coverage is the belief that nothing is going to happen. A doctor may not know of any incident with any patient that could possibly turn into a claim against him, but that doesn’t mean it won’t happen. A claim might show up even if you’ve done nothing wrong. In the U.S. anyone can sue a physician for any reason. That doesn’t mean the physician has been negligent at all, however the cost of defending a medical malpractice claim is tens of thousands of dollars. With no coverage in place the physician or surgeon will have to hire a defense attorney and pay the legal fees out of pocket. It doesn’t mean the plaintiff will win either, but it still can damage your reputation. Claims are a huge interruption to your practice and can possibly cost thousands of dollars in legal expenses. Without insurance coverage you’re putting your money, your medical practice, and your reputation on the line.
Conclusion of Buying Prior Acts Coverage
When considering buying a tail or coverage for full prior acts, without a doubt, it is worth spending the extra to protect yourself, your practice, and your reputation. It’s not as expensive as you would think to purchase full prior acts coverage, there are exceptions to the statute of limitations laws, and even a good physician that has done nothing wrong can be sued. This is not an area to cut corners to try to save money on your medical liability insurance.
