“Tail insurance” means the same thing as the formal term “extended reporting period (ERP)”, in the scope of medical malpractice insurance. This post will help doctors understand what tail insurance is, why they need it, how much tail costs, and offer practical advice on how to obtain affordable malpractice tail coverage.
When you change jobs, you need Medical Malpractice Tail Coverage. Rates vary from carrier to carrier, so the best way for a doctor to get the best coverage and rate is to use a brokerage firm, like MEDPLI.
TAIL INSURANCE DEFINED
“Tail insurance” allows you, the insured physician, to report claims in the future (claims which have not been made at the time the tail is purchased), after a claims-made policy is terminated. The formal term for this type of coverage is Extended Reporting Period (ERP). “Extended Reporting Period” describes what tail does for a physician – it allows you to extend the time period for reporting claims. Medical malpractice lawsuits develop slowly, with years between the date of the alleged medical incident (which gave rise to the claim) and the date the claim is actually made. Without a tail on the end of a cancelled claims-made policy, the physician would not be able to report the claim to the carrier.
Claims-made policies are the most common type of medical malpractice insurance policy, therefore tail is an important topic to understand. Each time a policy renews with prior acts, you are covered back to your retroactive date, thus you do not need tail. Buying prior acts coverage back to your retroactive date is sometimes referred to as “Nose Coverage.” When “Nose Coverage” is obtained, there is no need for tail coverage yet.
WHY DO DOCTORS NEED TAIL COVERAGE?
Doctors need tail coverage when they are no longer going to be covered by their claims-made malpractice insurance policy. A common exception is when you are just changing carriers but keeping your retroactive date the same. In this instance, no tail is needed from the old carrier because the new carrier is picking up prior acts, sometimes called “nose coverage.”
When doctors change jobs, they usually need tail insurance. Most doctors are insured on claims-made policies, which need tail coverage at the end. Tail coverage keeps the insurance in place for losses that have not yet been reported. Malpractice lawsuits do not happen overnight. Plaintiffs often do not file a suit until years after a bad outcome, so it’s necessary to protect oneself with tail coverage.
Example: Dr. Diaz works for the ACME Medical Group and plans to work for ABC Medical Group beginning 7/1/2019. He has been insured by ACME’s policy since 7/1/2009. He has never been sued in this time period. Dr. Diaz has a 10 year window (7/1/2009 start date to 7/1/2019 quit date) of potential liability Incurred but Not Reported (IBNR). After 7/1/2019, the policy will lapse, so he must buy tail or go bare (meaning no liability protection, which MEDPLI does no recommend).
HOW DO DOCTORS OBTAIN TAIL COVERAGE?
If you want to get tail coverage for free, you will have to meet one of these requirements: death, disability, or retirement. The most appealing option here is retirement, but most of us still have many working years ahead. The first step toward obtaining tail coverage is requesting a quote from your current carrier – noting the last day you need the policy to be in force. Once you get the quote from your current carrier, you should contact MEDPLI to get started with comparison quotes. We will evaluate your situation and help you find more affordable options.
You will generally have 30 days from the last date the policy is in force to exercise your option to buy tail from your current malpractice insurance carrier. However, MEDPLI recommends getting quotes in advance of your last day, because it can help you from a financial planning standpoint.
When buying tail coverage, you need the policy to cover you for a specified time period, starting with your retroactive date, ending with your last date the policy is in force. This period is considered your prior acts period, which is the time period of concern.
HOW MUCH DOES TAIL INSURANCE COST?
Tail insurance generally costs 200% of the annual premium for the underlying claims-made policy. If your annual rate is $25,000 for malpractice insurance, your tail insurance would cost around $50,000. This is a one-time expense to “close out” your claims-made policy, ensuring you have protection for future malpractice claims.
To save money on your tail insurance, you should first get your tail quote from your current carrier, which might be your employer’s carrier. Then, contact MEDPLI to work with tail insurance specialist. We often save clients more than $10,000 by shopping for a more affordable standalone tail.
For example, a Radiologist who worked in Chicago for 4 years decided to move to Atlanta. His carrier charged $55,000 for the tail. He contacted MEDPLI and lowered his tail cost to less than $40,000, while maintaining excellent protection from an AM Best “A” rated carrier.
To consult with a tail insurance specialist about your unique situation, please call 800-969-1339 or request your quote here.