What is a Claims-made policy, and why is tail coverage necessary?
What is a Claims-Made Policy?
A Claims-made policy provides protection for claims that ‘arise and are reported’ while you have the policy in force. Coverage is provided up to the policy liability limits 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‘, (Extended Reporting Period endorsement), or obtain similar protection from a subsequent carrier. A claims-made policy must continue in force 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.
There are circumstances in which the only option available may be to purchase tail coverage on an existing claims-made policy. The cost of purchasing Tail coverage on a claims-made policy is determined by the following factors:
- Territory or County the practice is located in
- Limits of liability
- Number of years Claims-made coverage was in continuous force
- Changes in classification during the previous coverage years
- Changes in territory, or limits of liability during coverage period.
The cost of Tail coverage is calculated as a percentage of the Occurrence premium in force at the time of purchasing Tail coverage.
- Claims-made Coverage Year% of Occurrence premium
- 1 74.8%
- 2 122.1%
- 3 146.4%
- 4 162.4%
- 5 173.3%
- 6 181.0%
- 7 186.7%
- 8 190.6%
The above premiums are a one-time cost to purchase coverage that will protect against any covered malpractice claims in the future. Evidently, the cost of purchasing tail coverage can be astronomical, especially for surgeons. It will be extremely beneficial to explore all your options before commiting yourself to purchasing tail coverage or switching your current coverage.
Physicians and surgeons looking to make changes to their coverage based on their future plans and retirement goals would benefit from a comprehensive review of their malpractice insurance. Please call PriMed Consulting at 800.528.3758. Email: firstname.lastname@example.org www.primedconsulting.com. 802 West Park Avenue, Bldg. 3, Suite 302, Ocean, NJ 07712
PriMed Consulting is an independent medical professional liability agency
serving NY & NJ.
Source: MLMIC website