By FlexMedStaff

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Tail insurance is an important form of protection for physicians when it comes to malpractice. It is designed to protect physicians in the event that they are sued for malpractice after they retire, resign, or switch insurance carriers. In this article, we answer all your questions about tail insurance. This article focuses primarily on tail insurance for physicians with individual, claims-made malpractice policies rather than those on group policies.

What is tail insurance?

Tail insurance, also known as extended reporting coverage (ERC), is an optional add-on policy for malpractice insurance. It provides coverage for claims made against a physician after their malpractice insurance policy expires.

Who needs tail insurance?

Those physicians who cancel their claims-made policy may require tail insurance for financial protection if a claim is filed while the claims-made policy is no longer active. One of the more critical things to understand is that claims-made policies do not include tail insurance.

*Generally, physicians with occurrence-based malpractice policies will not require tail insurance, but physicians should verify with their malpractice carrier the length of tail provided. The reason is that you could have an occurrence-based policy that only offers two years of coverage beyond the cancellation date.

Why is tail insurance recommended?

Without tail insurance, you could be on the hook if a malpractice claim is filed against you when the policy is not active. Legally, a malpractice carrier providing a claims-made policy will only defend a physician if the malpractice claim is filed while the policy is active. On the other hand, if the policy is no longer active and a malpractice claim is filed, the malpractice carrier will not defend the physician. This would mean that the physician would be financially responsible for their legal defense. Even worse, their assets could be lost if there is a large settlement against them.  

What alternatives are there to getting tail insurance if you retire from medicine?

Physicians that retire or quit practicing medicine wanting to remain covered could consider keeping their claims-made policy active rather than getting tail insurance. The only downside is that it may be more costly to keep the claims-made policy active until the statute of limitations expires.

*Some malpractice careers will provide “free” tail insurance if the retiring physician agrees never to practice medicine again. Make sure to check with your malpractice carriers if tail insurance is needed. One of those carriers that provide free tail insurance for retiring physicians is MagMutual.

How many years does tail insurance protect you?

Not all tail insurance is guaranteed to protect you forever. There are tail insurance policies that will only provide 1-3 years of additional coverage. On the other hand, there are unlimited or infinite policies that never expire. Indeed, the length of your tail insurance will affect your premium.

What is the statute of limitations for filing malpractice claims?

The statute of limitations is different in every state. Usually, it’s two or three years. Depending on the state, it may start when the complication occurred or was discovered. Understanding the statute of limitations is even more critical for those physicians that treat children. In most states, the statute of limitations does not start until the child turns 18. Thus, the treated child can file a malpractice claim until they are 20 to 23 years old. The statute of limitations for malpractice claims is state-dependent and should be discussed with a legal professional.

Should you continue your claims-made malpractice policy for two years to satisfy the statute of limitations?

This is not always the best idea and should be evaluated on a case-by-case basis. As stated in answer to the previous question, it is sometimes unclear when the statute of limitation starts. It is state-dependent, so if you continue the claims-made policy for an additional two years, it may not cover you if the claim is filed after two years but before the statute of limitations expires.  

How long do I have to purchase tail insurance after canceling my claims-made malpractice policy?

Most malpractice policies offer 30-60 days of tail insurance once the policy is canceled. What does this mean? If you terminate a claims-made policy, the malpractice career will cover you for an additional 30-60 days. This allows you time to purchase tail insurance or find “nose” coverage if you are looking to be fully covered for the extent of the statute of limitations.

How much does tail insurance cost?

Generally, tail insurance is usually 1.5 to 2 times more than your annual malpractice premium, but it could be much more. Tail insurance costs depend on your specialty, state, policy, length of tail, and the malpractice market.

Are there monthly premiums associated with tail insurance?

No. Usually, physicians pay a one-time, upfront fee for tail insurance.

Does tail insurance include a “deductible?”

It is rare for tail insurance to include a deductible, but it can be written into the policy if you want to save money.  This would mean the physician must first pay the deductible amount if a malpractice claim was filed before the carrier puts money toward the case. This includes legal and/or settlement fees.

Can my tail limit be decreased to save money?

Yes, this would mean the physician would be covered for a lower dollar amount than their malpractice policy they had. Although this will save you some money upfront, it could cost you more if the limits do not cover legal fees and settlement associated with a successful malpractice claim.

Where to buy tail insurance?

One of the easier ways to buy tail insurance is to continue working with the same carrier that provides you with malpractice coverage. You can also shop around, as you might find a carrier that can provide tail insurance for cheaper. Ensure you understand the policy documents if you find a more affordable policy.

Do I need to purchase tail insurance when switching malpractice carriers?

Maybe! If your new malpractice carrier does not provide “nose” coverage, you would have to consider getting a tail to protect you from prior acts. You can also find an independent malpractice carrier that will provide “nose” coverage in the event that your new malpractice policy does not include it. 

Is “Nose” coverage the same thing as tail insurance?

Sort of! “Nose” coverage is an optional add-on policy for malpractice insurance offered by carriers to protect you from claims filed after you cancel a different policy. So in some way, it is similar to tail insurance but packaged within your new malpractice policy as an add-on. 

Do I need tail insurance if I was on a group malpractice policy?

Maybe! Generally, if the group malpractice policy remains active, you will not require individual tail insurance. It would be best if you verified this with the malpractice carrier. This will be if you work for a staffing agency or healthcare facility that places you on a group policy rather than having your own individual policy. Physicians must recognize that if that group policy is canceled for some reason, they may be on the hook for acquiring tail insurance.

Final thoughts

Getting tail insurance can provide peace of mind and security for physicians planning to retire or leave their practice. It’s essential to take the time to research different policies and insurers before choosing one that meets your needs and budget. Hopefully, this article answered all your questions about tail insurance, so you are better prepared for when that time comes and you might need it. 

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