Tail Coverage under Medical Insurance

The rules and regulations about statute of limitations, which limit the time someone can file a lawsuit, varies state to state. In the case of someone bringing the lawsuit after a policy has ended what happens then? This is where the term ‘tail coverage’ comes to the front line. How it works will be explained below.

Claims-Made Policy

There must be an understanding of what a standard claims-made policy covers before you can grasp the notion of tail coverage.

Incidents that occurred and were reported during the policy’s effect are known as claims-made policies.

Policy Through Tail Coverage

Tail coverage gives protection for claims that have been reported after the policy had already been cancelled or expired, unlike the standard policy that only covers during that time.

Let’s say a Doctor John had his policy from June 1, 2016 until June 1, 2017, and someone reports an incident on December 1, 2016.

Patient Doe states that the malpractice happened on March, 2017, but does not report until September 1st, 2017, 3 months after the policy ended. Without purchasing tail coverage, Doctor John would not be covered for what happened at the time of the incident because the claim was made after the policy time period.

Having a policy that covers the Doctor is important for both the Doctor and the Patient. Trying to collect compensation from the doctor out of their own pockets would not have as much success as if it were collecting through an insurance company because there is a guarantee the money would be there.

The tail coverage only protects malpractices done during the effect of the policy, even if the claim was made after, but it does not protect malpractices done after the policy period. These policies also tend to have a different cap in liability. Just a couple of things to keep in mind.

What is its Cost?

Most insurance companies have to provide the option of tail coverage to cover claims during the period of expiration or cancellation. This coverage exceeds the insurer to pay for an additional premium, but the issue with that is that these extra premiums can be extremely costly; 200% of a claims-made policy. The pricing varies upon the location and specialty of the doctor.

There is a possibility for the payments of this additional premium to be spread out in installments, making it easier to pay. It can also serve for tax purpose by being claimed as unreimbursed business expense. The best thing for the doctor would be to be a part of a group that either pays for the coverage or pays for part of it.

Any Other Possibilities Aside from Tail Coverage?

There are a few other options that the doctor can opt-out to do:

  • There is something known as ‘extended reporting’, that is less expensive than tail coverage.
  • Purchasing a limits of liability that is lower or limiting the tail coverage, but the doctor needs to make sure that fulfills requirements of place in which they are practicing.
  • There is also something known as ‘nose coverage’. This coverage protects the insurer from acts performed before the new policy took effect. It provides the same coverage as a tail coverage, but they are the opposite of each other.

Often times theses coverages would not be offered to doctors that have had many reports filed against them because that is no benefit to the insurance company. Also, if the doctor came from a group practice, nose coverage is less likely to be able to be purchased by the doctor because the doctor’s liability could be associated with the group. It is important to always seek out the help of a medical malpractice lawyer as soon as you can.

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