Tail insurance is that necessary evil that comes with having a Claims-Made malpractice insurance policy. It’s expensive, yet critically important to ensure your long-term protection against claims. But what happens if you forget to buy the tail? Or if you were promised a tail by a previous employer, and they dropped the ball? Let’s talk about what to do IMMEDIATELY upon discovering that your tail has lapsed to help you minimize the damage and fix it, if at all possible.
It can be absolutely sickening to realize that your tail insurance offer has lapsed. And it can be for any number of reasons… maybe you didn’t get the bill, or you just got busy and forgot to pay it, or maybe you had someone else in charge of managing your coverage and they simply made a mistake. It’s more common than you may realize.
Just the other day, I received a call from a doctor who discovered that her previous employer had promised to buy her tail and didn’t… and now she’s 6 months out with no insurance.
So, why is this a big deal?
If you had a Claims-Made malpractice insurance policy and the coverage lapsed without buying tail, not only are you uninsured at the present time, but you’re also uninsured for any prior work that you’ve done all the way back to your retroactive date – even if you paid the premium for years and years.
Each claims-made policy has a retroactive date listed. This retroactive date is the date that your insurance policy covers you “back to”. So, if your insurance policy had a retroactive date of March 1, 1990 – that policy covers you for any potential claims made for services rendered all the way back to that date.
If you let your policy lapse without securing tail – you’re not covered for any work that you’ve done all the way back to March 1, 1990. And that’s a big deal.
If you try to secure new malpractice coverage in the future, it’s going to be a RED FLAG to the underwriter if you have a significant gap in your insurance history.
So, what should you do if you find out that you’re accidentally bare?
Immediately contact an agent to discuss the situation. Be honest about what happened (even if you let your tail lapse on purpose). Depending on the reason or circumstances at play, there may be some options to request special accommodations to reinstate your tail offer and give you a second chance to buy it.
If you’ve been with the same insurance carrier for many years and never really had an issue with late payments in the past, and this was simply an oversight, chances are they’ll be willing to reinstate your policy and give you an extended period of time to secure your tail.
If you’re not able to have your old policy reinstated, the agent will have to go to market to look for replacement coverage for you. Be sure to provide as much information as you can on what kind of insurance you had before, when it cancelled, and any other noteworthy items.
Understand that your options may be limited. If too much time has passed, the number of insurance carriers willing to pick up this exposure will be FEW. And any replacement coverage may or may not cover you for the entire period that you’ve been bare.
The longer that you’re bare, the harder it will be for you to find replacement coverage that matches what you had before.
There are carriers who can sell “stand alone tail” which is tail insurance offered on its own – not from the carrier that you were insured with before. If your previous carrier is not willing to give you another offer to buy tail from them, then one of these other markets may be able to give you a second chance to secure tail coverage.
If you can’t get your tail reissued or can’t find a replacement tail solution, your next option is to secure a new malpractice policy and to ask for the carrier to backdate coverage as far back as they can. While carriers aren’t usually excited about this type of request, many will be able to help you out (within reason), especially if you’re honest about your situation and are willing to stay insured with them for several years in the future. Again… the sooner the better with these requests. Don’t let too much time go by before you secure new coverage.
If a carrier is willing to pick up your prior acts and cover previously bare work, then you need to stay with them for the foreseeable future. That’s the least you can do for them bailing you out.
Sometimes we’ll have a situation where a doctor has been uninsured for several months and the new carrier is not willing to backdate their policy more than 30-60 days. If this happens, you may still have a small period of time where you’re uninsured – so that’s a risk for you going forward.
If you ARE able to secure new, replacement coverage – or have your old policy reinstated, the insurance carrier will likely ask you to sign a “No Known Loss Statement”.
This is a document signed by you in which you represent that to the best of your knowledge, you’re not aware of any adverse events or claims that may have occurred between the time your policy canceled and the time you’re applying for reinstatement.
In addition to the No Known Loss Statement, the carrier will likely require you to pay all past due premiums or charge you a rate that accounts for the additional exposure that they’ll be picking up.
It’s important for you to know that your options will, indeed, be limited when you’re looking for a carrier to pick up coverage for you over a gapped period of time. The “best” malpractice carriers have pretty strict underwriting guidelines and oftentimes they won’t offer coverage for these types of situations.
There are, however, several non-standard insurance carriers that are willing to pick up “hard to place” business or cover doctors in a distressed situation.
But, the coverage that is issued through non-standard carriers is generally more limited in nature. For example, most non-standard carriers do not offer Occurrence coverage (only Claims-Made) and they typically have a hammer clause (which means the policyholder does not get consent to settle claims).
Non-standard malpractice insurance is also more expensive. So not only are you going to have a more limited policy, but you’re also going to be paying a higher rate.
For most providers, coverage in the non-standard market is temporary and is seen as a “rehab” period while they get back on their feet. You may have to stay with that non-standard carrier for a period of time before you’re able to move back into the standard market.
Assuming you pay your premiums and there are no other issues with your coverage, most doctors are able to switch back to a more competitive coverage option within a few years.
So how do you make sure this doesn’t happen to you? Here are a few tips to leave you with today:
1. Make sure that you have negotiated the terms of your tail insurance up front with your employer.
It should be crystal clear WHO is going to buy it, WHEN they will secure it, and HOW proof of coverage will be provided. We have some previous episodes on how to negotiate coverage details with potential employers, so we’ll link to that in the show notes for you.
2. Make sure your contact information is UP TO DATE with your carrier, including your mailing address, email address, and phone number.
The carrier has a legal obligation to give you an offer to buy tail insurance upon cancellation of your policy. And most carriers will do everything in their power to make sure you’ve been given the opportunity to secure it. But if they don’t have your correct contact information, they won’t be able to get ahold of you. So, it’s up to you to keep this information current with them.
3. Make sure your office manager or administrator understands the risk to YOU if the coverage lapses.
This is one of the most important protections that you have as a healthcare provider – and it is a PAIN IN THE NECK if you accidentally let coverage lapse, so make sure they are diligent about handling your malpractice coverage appropriately.
4. Work with an independent agent to give you an additional “set of eyes” to ensure that you don’t miss a payment or have any other issues with your policy or your tail coverage.
Your agent will be kept in the loop if you have a missed payment or any other issues with your coverage, so they can help you stay on track and assist with any other questions that you have with your policy throughout the year.