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Tail coverage for Claims based malpractice coverage

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  • Tail coverage for Claims based malpractice coverage

    I had a question regarding the tail coverage.

    I switched jobs in July 2017. Due to being a regular visitor of WCI blogs and podcasts, I was aware at that point to inquire about whether my policy was claims based vs occurrence based (I should have known better at the time of signing the contract). It turns out that my contract mentioned that the policy could be either occurrence based or claims based, however, if the employer chooses to have claims based policy in place, the employer will be responsible for arranging the tail coverage for the employee when he leaves. So that all sounded good. At the time of leaving the job, I reached out to the person in charge and requested proof of paid tail coverage for my claims based policy. Below is the response I got.

    “The medical malpractice coverage afforded to Dr **** (myself) is on a claims-made basis, and the limits were shared amongst all employees, employed physicians, and all entities of **** (the healthcare system I was employed by).
    As this is a “shared limit” program we cannot tail out the policy every time an employee leaves. The coverage remains in place and is renewed annually.
    In lieu of a tail, the formerly employed physicians are continuously covered for any future claims made against them for any acts or errors related to the time of their employment, or back to their retro date on coverage.
    The “reporting rights” letter is from the insurer and it clearly states he can report future claims for incidents that occurred during his employment.
    If **** (the healthcare system) ever decides to tail out their coverage instead of renewing it, then Dr **** (me) would also be covered under that tail policy.”

    Does this sound legit? Am I covered or I have reasons to worry and dig further deep in to this?

  • #2
    I'm no expert on this, but it sounds like your previous was self-insured. And you should be ok.


    • #3
      Simple answer is yes this is typical for large physician groups.  When you need proof of prior coverage / loss history just request a credentialing report from your previous employer.  You'll have to request it in writing and keep a record of it so that you can get them quickly as you move from employer to employer.


      • #4
        This is a typical situation for a large employer.  The insurance is claims made, but they have what is known as an "extended reporting period."  Basically this is a policy that covers the claims made each year, but all former employees continue to have claims made coverage after they leave under the extended reporting mechanism in the policy.

        The only risk would be if the employer goes bankrupt and drops the claims made coverage, then the physician could lose coverage.  However, the vast majority of claims are initiated in the two years after the event in questions, and you would likely be aware if your former employer was at risk of bankruptcy in the very near future.


        • #5
          Thank you so very much for all your input, very helpful.


          • #6
            I have a few questions regarding tail coverage. I recently started a job as a new attending and had my initial contract reviewed by a lawyer (exclusively reviewed physician contracts) but this may have gotten missed. It states that I would be billed for any tail coverage that the group would have to pay if I leave my job before the term ends (belong to a large physician owned group with a claims based malpractice insurance).

            If I decide to leave this job in six months or under a year, how large is this bill? Obviously it would be specialty specific (I’m in a non surgical specialty, not primary care).

            Would it be possible to have the next job pick this up if they agree to it or purchase tail coverage at my own expense? This is sort of confusing to me and not sure how standard this sort of language is within physician contracts but I do recall during negotiations that about 95% of the contract was non-negotiable as it was the same for all physicians they hired.

            Any clarification or help with this would be appreciated! Thank you in advance.


            • #7

              If I decide to leave this job in six months or under a year, how large is this bill? Obviously it would be specialty specific (I’m in a non surgical specialty, not primary care)
              Click to expand...

              Call your malpractice carrier and ask them.

              Would it be possible to have the next job pick this up if they agree to it or purchase tail coverage at my own expense?
              Click to expand...

              Anything is negotiable and this could easily be negotiated.


              • #8
                Tail coverage typically costs in the range of 2 to 2.5 x the annual policy premium.  However, there are ways to get this reduced in some specific circumstances, depending how long the underlying insurance was in place, depending how long the doc worked under the policy, and depending if the doc is retiring from practice.  The new employer may also be able to arrange "nose coverage" in concert with the new policy, in lieu of a tail on the old policy.

                For Adp1987, how long is the initial term of your contract?  Who pays the tail if you stay for the term of the contract and then leave?


                • #9
                  It is extremely rare for a new carrier to pick up a physician’s past exposure when working for a group or hospital.  Reason being, to properly cover the new policy should name the old entity as an additional insured.  That’s a lot of unknown exposure for your new carrier.  The only time this may occur is if you are fortunate enough to join a group where the carrier is the same and you have a good agent / broker that could negotiate this with the carrier.  That’s a long shot.  If the carrier is stable I’d tail out and move forward without the past exposure.


                  • #10
                    My initial contract length is 2 years. I believe if I stay for the full term of the contract, the group will pick up the tail. I am deciding whether to stay in private practice or return to an academic job. I am just worried that the amount would be very high and I won’t be able to cover it if I decide to leave after 6 months.

                    I could just call the carrier and ask them myself without raising any alarms?


                    • #11
                      Most carriers will not deal directly with individual roster physicians for questions outside of risk management or claims. Those questions would be referred back to the agent/broker and then your employer would be looped in.  I’m assuming that you know your annual premium charge and that is billed back.  You could have a conversation along the lines of how long till your premium reaches maturity and is our ERP unlimited and if so what is the percentage of annual premium charged.  If you still feel like that is touching the third rail then budget 2.0 to 2.5 times your annual premium and you’ll probably be safe.


                      • #12
                        I don’t know my premium as I wasn’t given that information and it’s a large physician owned group policy so not even sure where I’d ask for that information without people noticing it. I’m going to guess it may be in the range for 10-20k? Is that safe to assume or undervalued.


                        • #13
                          Perhaps you could ask a whole bunch of questions relating to the contract, and ask them all together to avoid raising alarms that you are thinking you might leave early.  Maybe ask the theoretical cost of tail coverage if you were to "get hit by a bus" during the 2 year contract, then ask who covers the tail at the end of the 2 year contract. This could comes at the end of a list of questions about vacation time, holiday policy, sick time, and other questions that are pretty routine to ask if you are a detail oriented person.

                          Whatever you do, I would try to avoid mentioning that you are contemplating leaving before the end of 2 years, as this could nix the offer.  And also take some time to carefully reflect on whether or not you really want this job.  Jumping around too often does not look good on your CV.


                          • #14
                            I second White Beard’s comments.  There is simply too many factors in any individual situation to approximate a premium.