Who’s Covering Your Tail? The ins and outs of professional liability insurance

Are you looking to switch medical practices? Are you in the market to purchase a professional malpractice insurance policy? Are you planning to retire soon? If you answered ‘yes’ to any of these questions, you will likely confront the concept of “tail” insurance.

Now is the time to dust off your employment agreement and professional liability insurance policy and review what happens in the event a lawsuit is filed against you after you leave your current employment. This means paying special attention to whether your professional liability insurance policy provides for claims-made or occurrence-based coverage, and if it’s the former, determining who is responsible for purchasing tail coverage.

Why You Need Tail Coverage

Claims-made coverage protects against professional negligence as long as a two-part test is met: First, you must have the claims-made coverage in place when the negligent act occurs at practice number one and, second, you must be covered by the same carrier when you are notified of the claim while employed by practice number two. If either test is not satisfied, the current claims-made insurance policy will not provide coverage in the event you are sued for an act of negligence that took place while you were employed by practice number one. If you leave a practice that has occurrence-based professional liability insurance, on the other hand, insurance coverage is seamless, and no tail insurance is required. The majority of insurance policies written for medical practice groups are for claims-made coverage, however.

Take this example: An ENT practice maintains claims-made professional liability insurance coverage for its physicians with ABC Insurance Co. A physician decides to leave the practice and is now employed by a new practice, which maintains claims-made coverage with XYZ Insurance Co. Within a few months of the physician’s new employment, a lawsuit is filed for a procedure performed by the physician while he or she was employed by the former practice. By leaving the former practice, the departing physician automatically fails the two-part test for claims-made coverage; the second prong is not satisfied. Therefore, even though the physician has liability coverage through the new employer, this insurance policy will not cover the lawsuit described above.

Now is the time to dust off your employment insurance policy and review what happens in the event a lawsuit is filed against you after you leave your current employment.

If claims-made insurance is the benefit you have received in your employment agreement, it is imperative that you acknowledge that tail coverage is necessary when you leave the practice. If you leave the practice and join another practice within the same state and stay insured by the same insurance carrier, however, the insurance carrier will provide continuous coverage, and no tail insurance policy is needed.