Tail insurance is that necessary evil that you need to take care of after you’ve cancelled a Claims-Made policy. But the problem with tail is that it’s expensive – sometimes VERY expensive. So, often doctors will ask us about reducing the terms of the tail to keep costs down. But, this can be a dangerous proposition. So today we’re going to answer the question “How long do I need to carry tail insurance?”. By the time we’re done, you’ll have all the facts lined up so that you can make a decision on how long of a tail YOU need to purchase.
Before we talk about how long you need to carry tail insurance, let’s do a quick refresher on what it actually IS.
Tail insurance is an extension of your policy that is required upon cancellation when you have Claims-Made coverage.
Your tail starts at your cancellation date and then it extends your protection into the future for any claims that may be made against you later on for the patients that you treated while you were working. If you have an Occurrence policy, you don’t need a tail.
If you don’t buy your tail after you cancel your Claims-Made policy, they you are essentially uninsured. If a claim comes in and there is no active policy in place, there is no protection, even if the event occurred when your policy was active in the past. So, as you can see, it’s an incredibly important thing for doctors to take care of – BUT tail insurance can be very expensive.
Tail insurance typically costs 1 ½ to 2 times the mature Claims-Made premium. So, if your premium was $10,000 a year, you can expect your tail to be around $15,000 – $20,000.
If you haven’t planned ahead for this expense, tail insurance can be a bit of a shell-shock. For that reason, doctors often look for ways to reduce the premium for their tail. And one of the ways you can do that is to limit your TERM.
Nearly all of the major malpractice insurance carriers issue what’s called UNLIMITED tail as a standard offering with their coverage. An unlimited tail is the industry norm and when a doctor has an unlimited tail, that means the coverage never expires.
An unlimited term begins protecting you from the date that your policy is cancelled and it extends your protection indefinitely into the future for any claims that may be filed later on. This means that your unlimited tail will cover you if a claim is filed next year, in 5 years, in 10 years, or even 50 years from now and beyond. An unlimited tail will even cover your estate in the event that a doctor passes away before a claim is resolved. Unlimited tails offer the most robust coverage for a doctor.
But, what if you don’t want an unlimited tail? Or you’re looking for a way to reduce your price a bit? In that instance, you may want to consider a LIMITED tail.
Limited tails extend your coverage for a specific amount of time. They are generally issued in increments of 1 year, 3 years, 5 years, or 10 years – although some carriers have more options than these.
When you purchase a limited tail, you are covered for any claims that are filed within that specific amount of time. So, for example, if you cancelled your insurance policy on December 1, 2022 and you bought a 5-year limited tail, then you would be covered for any claims made from December 1, 2022 to December 1, 2027 (assuming the triggering event falls within your coverage period).
If a claim comes in on December 2nd, 2027 – the limited tail has ended… which means, no coverage.
So, as you can see, limited tails are not nearly as robust as unlimited tails – which is why your premium is less expensive if you go the limited route.
When a doctor is considering a limited tail, there are several factors that they should consider before making a decision on how long to carry their tail insurance.
First, consider the fact that it can take several years for a malpractice claim to develop. A patient doesn’t necessarily sue you right after an adverse event occurs. If the treatment is ongoing over the course of many months, if they’ve seen many doctors and been in and out of multiple facilities, it may take some time before they finally get around to filing a lawsuit.
But what about the statute of limitations? You might ask.
Well, while the statute of limitations does offer you some protection, there are a few quirky exceptions that can cause problems for doctors.
Under a standard statute of limitations deadline, the victim of medical malpractice has a certain number of years to file a suit. Whatever the deadline, the statute of limitations “clock” typically starts running on the date when the alleged malpractice occurred, but most states allow special accommodations to the reporting period when the patient did not know right away (and could not reasonably be expected to know) that they were harmed by a medical error.
The Discovery Rule is used to extend the reporting time in instances when the injury is not immediately known. If, for example, a surgeon forgets to remove a sponge after a surgery, the patient may not know immediately why they are suffering from certain symptoms. Or, if a doctor did not promptly diagnose a condition like cancer, the patient may not realize the misdiagnosis for many years.
The statute of limitations “clock” does not begin, then, until the patient discovers or reasonably should discover the injury.
The other frequently overlooked item when it comes to malpractice statutes is The Minor Rule.
The Minor Rule is used to extend the reporting time for cases involving children. In most states, the statute of limitations “clock” does not start until the minor child turns 18. In these instances, minors or their parents or legal guardians have an extended period of time in which they can bring a suit against the healthcare provider. So if you’ve done peds work or treated children at any time in your practice, you need to be especially cognizant of this issue.
The bottom line for both of these “frequently looked items” – the Discovery Rule and the Minor Rule is that you just can’t count on the statute of limitations to be up… and that you’re completely in the clear when it comes to your long-term protection for your malpractice insurance.
So back to our main question today – how long should I carry tail insurance? The answer is – it’s up to you and what you’re comfortable with.
If you feel comfortable with your practice experience and don’t feel like there’s any real risk of a claim being filed beyond the next few years, then a limited tail might be just fine for you. But, if you’d rather not run the risk of a claim coming in after a limited tail has ended, then you probably want to go with an unlimited tail option.
When you’re getting your tail quote from your insurance carrier, be sure to ask if they offer both limited and unlimited tail options. And compare the rates for both to help you decide which option is right for you.
And don’t forget that you can shop around for your tail insurance, so be sure to engage with a trusted malpractice insurance agent or broker to help you collect quotes from other companies, as well. For a purchase as important (and expensive) as this, it’s best for you to have multiple options to consider.