So, you’ve cancelled your Claims-Made malpractice insurance policy and now, your carrier has given you a tail quote – but it looks like there are multiple options? And the price is significantly different, depending on which option you choose. Well, the reason for the different tail prices is that the coverage is different. You likely have an option for an unlimited tail and a few options for limited tails. So, what’s the difference? And how do you know which one to pick?
So, we’ve talked about tail insurance on several episodes before, but as a little refresher, let me give you a quick recap of what the coverage is and why it’s important…
Tail insurance is an extension of your malpractice 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 during the time of your original insurance period.
Here’s an example. Let’s say that we have a Dermatologist in Chicago, IL who bought her Claims-Made insurance policy for the very first time on January 1, 2014. She renewed that insurance every year for 10 years and then she decided to close her practice and cancel her policy on January 1, 2024.
Once she cancels the policy, her malpractice carrier will give her an offer to buy tail insurance. This tail insurance will start on her cancellation date (which in this case will be January 1, 2024) and it will extend her protection into the future, offering her a longer period of coverage for any claims that may still be filed against her for the patients that she treated from January 1, 2014 until January 1, 2024.
Just a quick side note, if this Dermatologist would have had Occurrence coverage, she would NOT have to buy tail. Remember, Occurrence policies stand on their own and you do NOT need to obtain tail insurance after you cancel this type of coverage.
If our Derm friend decides NOT to buy tail, then her protection ends. And there will be NO MORE COVERAGE if a claim is filed against her any time after the cancellation date. So, it’s really important that you handle your tail insurance correctly. Otherwise, you’ll leave yourself exposed.
Again… let me just be clear… If you don’t buy your tail after you cancel your Claims-Made policy, then you are essentially uninsured. Your policy has ended. And if a claim comes in after this time, there is no insurance, even if the event occurred when your policy was ACTIVE in the past.
Now, there are 2 types of tails that you can purchase – unlimited tails or limited tails.
An unlimited tail is the most robust and comprehensive kind of tail coverage. It does not have an expiration date, so the tail covers you indefinitely into the future. It even extends coverage to your estate, in the event that a doctor is sued but passes away before the case is resolved.
Most tail quotes are issued as unlimited tails, so it is the standard option that is offered to healthcare providers. You’ve probably heard me say on the podcast a few times before that the PRICE of tail insurance is typically 2x your mature premium. Well, that is the typical rate for an UNLIMITED tail. Again, the industry standard for tail insurance is to issue an unlimited tail for healthcare providers. For some malpractice carriers, unlimited tails are the only option they’ll give you.
But, sometime a doctor doesn’t want unlimited coverage – or they are looking for a more cost-effective way to extend their protection a bit. Well, if you don’t want or need an unlimited tail, then you can purchase a limited tail—which provides protection for a shortened amount of time.
The most common limited tails are 1-year tails, 2-year tails, 5 or even 10-year tails. With a limited tail, the protection ends at the end of the term, so if a claim were to be filed beyond that timeframe, there would no longer be coverage. Limited tails are less expensive than unlimited tails, but the price varies based on how long the tail goes.
The idea of a limited tail can be attractive, and while I’m not here to tell you that it’s the WRONG choice, I do want to point out 2 things that can cause issues for doctors when they choose to go the limited tail route. Many times doctors will look to the statute of limitations in their state and choose to roll the dice, believing that the window for filing a lawsuit has closed (or will soon close) – meaning they have no real risk. But remember that statute of limitation laws vary by state, and although these laws do set a time limit on a plaintiff’s right to file a medical malpractice suit, it’s not so simple.
There are 2 common exceptions to the law that allow a patient to file a malpractice case beyond the standard window of time:
Date of Discovery
This exception allows the statute of limitations to be extended until the patient discovers that he/she was the victim of medical malpractice (or a reasonably should have discovered the malpractice). This means that the statute of limitations “clock” doesn’t start ticking until the discovery actually happens.
Age of Discovery
The second exception has to do with the Age of Majority or Issues involving minors. This exception allows for an extension of the statute of limitations until a minor child reaches the age of majority (which in most states is age 18).
In both of these instances, a shorter-term limited tail may not be sufficient time to protect you for any future filed claims. Let’s go back to our Dermatology example. After 10 years of practice, she has cancelled her insurance and her carrier has given her the following tail options:
A 1-Year Extended Reporting Period, which would cost $11,778. A 2-Year Extended Reporting Period, which would be $14,723. A 3-Year Extended Reporting Period would cost her $20,612. Or, an Unlimited Extended Reporting Period would cost $23,556. The rates aren’t that significantly different in THIS example, so our Dermatologist would need to consider carefully which option she wants to choose.
And when it’s your turn to buy tail, you’ll want to carefully review all of your coverage options and determine for yourself which type of tail best fits your needs. There is no one size fits all here, so your agent can help you review the options AND provide their thoughts. And remember… you can always shop around if you want to compare tail quotes from other carriers.