Its time to hunker down and get your medical malpractice questions resolved. We know its no easy feat to comb through the daunting slough of varying information out there. With multiple carriers and brokers offering their own versions of the facts, it can be really confusing for some physicians to get a solid understanding of how their malpractice coverage works.
Understanding the types of medical professional liability insurance policies that are available to you is incredibly important in order to make informed decisions about your current and future coverage.
Here are some basic, must-know facts:
What are the different types of Medical Malpractice Insurance Policies?
There are two basic policies: Occurrence and Claims-Made.
What is an Occurrence Policy?
An Occurrence Policy provides coverage for claims that may arise from incidents that occurred while you had a policy in force, regardless of when a claim is reported, even if the policy is no longer in force. Occurrence coverage provides long-term, continuing protection for the physician.
For example: Say a physician had an Occurrence Policy in effect from January 2000 to January 2008, at which time the existing policy was not renewed. In February of 2009, a patient treated in 2007 files a claim against the physician. Is the physician covered? Yes. Since the physician had an Occurrence Policy in effect in 2007, the company that insured him in 2007 would defend him based on the 2007 coverage.
What is a Claims-Made Policy?
This type of policy provides protection for claims that arise and are reported while you have a policy in force. You are covered up to the policy limits that are in effect at the time the claim is reported. Therefore, a physician is only covered if the claim is actually filed while the policy is in force. To be protected for claims that are reported after the policy has been canceled, you must purchase Tail Coverage (see 5), also known as Extended Reporting Period Endorsement, or obtain similar protection from a subsequent carrier. A Claims-Made Policy must be renewed to provide protection or be replaced by Tail Coverage. When you elect to change Claims-Made carriers, Prior Acts Coverage must be obtained to cover your exposure from your first day of Claims-Made coverage. For example: Consider a physician who had a Claims-Made Policy from January 2000 to January 2008, at which time the policy was not renewed and Tail Coverage was not purchased. In February of 2009, a patient treated in 2007 files a claim against the physician. The physician would have no protection against this claim because the claim was not reported during the policy period.
What is the difference in pricing between the two policy types?
- Usually the basis for pricing of medical professional liability insurance.
- Generally higher than Claims-Made coverage during the first two years because the cost of claims that may be reported at some unknown time in the future is taken into consideration in the price determination.
- Increase annually, until they reach ‘maturity’ (in New Jersey, the fifth year, and in New York, the eighth year).
- Take into consideration the insurance company’s exposure to claims that may be reported on a year-to-year basis to determine price.
- Have increasing annual premiums because the longer the period you are insured with a company, the greater the possibility of a claim being reported.
What is Tail Coverage?
Tail Coverage is a supplement to a Claims-Made Policy that provides coverage for any incident that occurred while the Claims-Made insurance was in effect, but had not been brought as a claim by the time the insurer-policyholder relationship terminated. Tail coverage, also known as an Extended Reporting Period Endorsement, is generally necessary whenever an insured covered by a Claims-Made policy does not continue an active policy.
What is Prior Acts Coverage?
Prior Acts Coverage is a supplement to a Claims-Made insurance policy that may be purchased from a new carrier when a physician changes carriers and had Claims-Made coverage with the previous carrier. A Prior Acts Policy, also known as â€œnose coverage,â€ covers incidents that occurred prior to the beginning of the new insurance relationship, but for which no knowledge of any claim possibility existed.
What are Prior Acts?
Prior Acts are incidents that may have occurred, but have not yet been filed as claims, prior to the onset of the new insurance company-insured relationship. Companies typically require a new insured to purchase supplemental coverage (either Tail or Prior Acts Coverage) to protect against claims arising from prior acts.
What are Limits of Liability?
Limits of Liability = the maximum amount an insurer will pay out under the terms of a policy. Professional liability policies typically specify both a per occurrence limit and an aggregate limit for all claims incurred during the term of a policy, e.g., $1 million (per occurrence)/$3 million (aggregate).
How do you qualify for FREE Tail Coverage under a Claims-Made Policy?
In order to qualify for free tail coverage, the following three conditions must be satisfied:
- You must have held the same coverage for 5 consecutive years.
- You must fully retire.
- Â You must be at least 55 years of age.
Note: These rules may differ amongst different carriers and between NJ & NY carriers.
Have further medical malpractice insurance questions? Please don’t hesitate to contact us.