Should a Nurse Practitioner Choose Claims Made or Occurrence? | Occurrence Coverage or Claims Made for Nurse Practitioners

Should a nurse practitioner choose claims made or occurrence-based malpractice insurance? If you’re working for a hospital or hospital network, they’re always going to pay for your underlying premium, so how much they pay for you on an annual basis, but it’s also very likely that they’re going to pay for any kind of insurance needed after the employment has terminated. Most of the big networks are now self-insured. Some of them may offer a claims-made policy, but they’ll almost always pay for the tail. The only time or at least the most likely time that you’d have to make a choice between an occurrence-based policy, or a claims-made policy is if you’re either out on your own in a state that allows it, or perhaps you’re in a private practice working with the physician.

Differences Between Claims-Made and  Occurrence-Based Policy

What are the differences between the two? 

Occurrence-Based Coverage

Let’s take occurrence-based coverage first. An occurrence-based policy simply means that a policy has to be in effect when the malpractice occurs. So, it doesn’t matter when a claim is filed, you are covered no matter what if you have an occurrence-based policy. No tail insurance is necessary. 

Claims-Made Policy

For a claims-made policy, a policy has to be in effect when the claim is actually made. It’s possible a claim could be filed against you after the employment is terminated. So, you need a gap policy or also known as tail insurance, that covers the gap between when you leave an employer and then the last day somebody can sue you. It’s called the statute of limitations and in most states, it’s two years. There are a few exceptions, but let’s just take two years as a kind of guiding principle here.

Tail Insurance

And so, you would have to get an additional policy that covers that gap. And that’s, as I said before, called tail insurance. Now, let’s talk about the cost. Tail is generally around twice what your annual premium is. Whatever you pay on an annual basis, multiply those times by two, and that’s a good estimate of what your tail costs will be. It’s a one-time payment, you don’t have to pay for it every year, but you can choose different policies that are different lengths that cover a different amount of time. You could get a tail that lasts for two years, three years, five years, indefinitely, and then the price would change a little bit based upon, obviously the longer, the more expensive it’s going to be. It does not make any sense to get a policy that doesn’t cover the full statute of limitations in whatever state you’re in. If you get sued and you’re not covered, then you could potentially be personally liable.

So, you always want to have a backstop if you’re going to be sued for any kind of incident with any employer. And you want to make sure you have a long enough tail to cover you. Occurrence-based, as I said before, doesn’t need tail insurance, but it costs a little bit more per year. It’s about a third more expensive. Let’s say you were paying 3000 a year for your insurance. Well, if you had an occurrence-based policy, it’d be $4,000. So, not a huge price difference between the two, but in the end, it can be huge because as I said before, if you had a $3,000 annual premium for a claims-made policy, your tail would be $6,000. Whereas with an occurrence-based policy, it would be nothing. So, you really need to figure out how long you’re going to be with an employer to determine which policy is best for you.

Nurse Practitioners and Claims Made

Now, an NP normally is not given the option if you’re going to work for a physician-owned practice. They’re going to dictate what type of policy you get. And then they’re also going to dictate whether you must pay for the tail or not. Now, that’s something you can negotiate in your employment agreement. You need to look at the policy about professional liability insurance. You need to see what type of coverage they have, who it’s with, how much it costs per year, and then who pays for tail insurance. Those are four things you absolutely need to figure out before signing any kind of contract. It’s not prohibitively expensive for an NP. I mean, let’s say you’re an FNP, it’s usually somewhere between 1500 to 2,500 a year. So, the tail cost would be somewhere between like 3,000 to 5,000. And it’s a one-time cost, as I said before. But still, $5,000 is not an insignificant amount of money.

And so, always having the employer be the one that foots the bill is obviously more favorable than not. So, that’s the difference between the two policies, whether what is better for you, or another just depends upon the situation.

Nurse Practitioner Malpractice Coverage Tail Cost

How much does tail insurance cost for a nurse practitioner? First, we need to talk about what types of malpractice insurance are available, and then when you have a certain type, do you need tail insurance? First, the setting is important. If an NP is employed by a hospital or hospital network, usually, at least nowadays, they’re self-insured, which means tail insurance generally is not necessary. If they do have a claims-made policy, then tail insurance is necessary. However, if you’re employed by a hospital or hospital network, it is very rare that a nurse practitioner would have to pay for their own tail. When they would have to pay for their own tail is in a kind of private practice setting.

Types of Insurance for a Smaller Physician-Owned Group

If they’re employed by a smaller physician-owned group, or in some states if they have their own practice. In that case, two types of insurance are the most common. One is called an occurrence-based and one is claims made. Now, with an occurrence-based policy, the malpractice incident only must occur while a policy is in effect and meaning tail insurance is unnecessary. As far as claims made insurance goes, a policy must be in effect when the claim is made. And so, tail insurance is necessary for a claims-made policy. Just to kind of break down claims made, let’s say, a nurse practitioner is employed with a private physician-owned practice. If they terminate their employment, there still is a gap from when a patient knows the last day that the nurse practitioner provided care for the practice.

Statute of Limitations

Usually, there’s a two-year statute of limitations in most states. And in that case, the patient can sue after the nurse practitioner no longer works for that practice. Therefore, a policy must be in effect that kind of covers that gap in between when they leave and then the last day, they can be sued by somebody. As I said before, in most states, it’s two years from when the patient either knew or should have known of the malpractice incident. There are also some minor exceptions for minors when they become adults, that type of thing. But for the most part, two years is kind of a good rule of thumb. In the employment contract, if the nurse practitioner has a claims-made policy, it’s going to state who pays for tail insurance. If it’s a private practice, I’d say it’s often, the NP would be responsible for it.

As I said before, if they’re in a hospital or hospital network, more times than not, the hospital is going to cover it. If the nurse practitioner is responsible to pay for the tail, it must be purchased generally prior to or right around the date of termination with the employer. And a good rule of thumb is it’s about twice what your annual premium is. Your annual premium is simply how much the employer must pay to insure you each year. If you had to pay for tail insurance, it normally is around twice what your annual premium is, and it’s a one-time payment. You don’t have to pay it every year. It’s all paid upfront and your tail is covered for as long as whatever the length of the tail policy you bought was. Tail insurance can have longer tails than others.

I mean, you could get theoretically one year tail, a two-year tail, or an infinite tail. For most people, five years is kind of a good safe amount. If you had a two-year tail, but then something happened in year four or five, you are no longer insured, and it would be an issue. Now, how much does malpractice insurance cost for most NPs? Usually, it’s somewhere between 1500 to 2,500. So, let’s just say it’s $2,000. Then your tail cost would be around 4,000. Not like an enormous amount of money, but certainly something you may want to negotiate prior to signing the employment agreement. A couple of things to think about: one, if any, if it states that you must pay for a tail, you can always ask the employer to pay for it. That’s one way of doing it.

Paying the Tail Insurance Costs

If they’re unwilling to pay the entire amount, sometimes we’re successful in kind of tiering it. Let’s say, you have a three-year term for your contract. You could say one-third of the tail costs will be taken over by the employer for each year they’re there. So, by the time the three years are over, the employer pays the entire cost of tail insurance. Another way of getting out of having to pay for it would be if your new employer pays for your old tail. That’s called nose insurance. Or, if you stay with the same insurance company, normally, they will just roll over your policy wherever your new employer is, and you wouldn’t have to pay for tail insurance. This is something you can negotiate in the contract. Now, some employers are just simply unwilling to change any terms in the agreement, or maybe unwilling to change this term. And then, if that’s the scenario, you must make the decision of whether it’s a deal-breaker for you or not. So, that’s how much tail insurance costs, usually around twice what your annual premium is. You certainly want to find out what your annual premium is prior to signing the agreement. And that way you can forecast what your tail insurance cost will be.

Occurrence Nurse Practitioner Insurance

What is occurrence-based malpractice insurance coverage for a nurse practitioner?  If you’re a nurse practitioner and you’re out in either private practice, meaning, you’re working for a physician-owned practice, or perhaps you own your own practice in a state that allows it, there are going to be two types of insurance that you can utilize. One is called claims-made coverage, and the second is occurrence-based coverage. What is claims-made? Claims-made coverage simply means that a policy has to be in effect when the claim is actually made. You could be with an employer and then the contract would terminate for whatever reason, and then that policy is done. It only covers you for the time when you were there.

So, there would need to be a gap policy also known as tail insurance that covers the gap between when you leave the employer and then the last day somebody can sue you. For most states, that’s two years, and that’s called a statute of limitations. Basically, it’s a limitation on filing a suit against somebody. And for Med Mal claims in most states, it’s two years. And you would need that policy to cover your gap so that if you did get sued during that time, you would be covered. Now, as far as tail insurance is concerned, it’s usually about twice what your annual premium is, and your annual premium is just how much the employer pays for you to be insured on a yearly basis. I’d say most NPS, at least their annual premiums are probably around $2,000.

Should You Contact an Attorney About Malpractice Provisions in Your Contract? 

Have you ever stopped and wondered if there was a reason why you should perhaps stop and contact a nurse practitioner contract attorney about the various provisions written into your nursing contract? You are not wrong for having this thought. 

An attorney can go over the questions you may have about your contract to ensure that it is a safe contract for you to sign: 

• Does it provide adequate malpractice insurance for you? 
• What are the stipulations attached to the malpractice insurance that is provided? 
• Are there reasons to believe that you should purchase additional malpractice insurance on top of what is automatically provided by your employer?
• Is there anything else that you should ask for from your employer before accepting the position (such as the removal of a non-compete)? 

Your attorney is on your side in all of these matters, and he or she will look out for you in ways that no employer ever will. Scanning through contracts to look for anything that might raise a red flag is what these professionals are paid to do. 

Consultation with Chelle Law

Hiring an attorney to go over your contract takes just a short amount of time and a small amount of money to buy you the peace of mind that you want when you dive into a new job. If you would like to get a meeting set up with one of our talented professionals who can go over every aspect of your contract line by line, we strongly encourage you to contact us and let us know how we can be of assistance today.