What is Tail Coverage for Physician Malpractice Insurance?

Tail Insurance, also known as Extended Reporting Period coverage, must be purchased when a physician has claims-made professional liability insurance coverage.  Tail insurance covers the gap between when a physician leaves an employer and when the statute of limitations on filing a medical malpractice claims ends. 

Malpractice coverage is a type of professional liability coverage that helps protect physicians and other healthcare professionals from the financial risks associated with lawsuits in which patients believe they were harmed as a result of an incident involving medical care. The amount of coverage depends on how much the policy is worth (premium) as well as your specialty – personal injury attorneys are more likely to take cases against physicians working in hospitals than those who practice family medicine or internal medicine in private practice.

Most malpractice insurance carriers provide coverage that has a deductible clause that can range anywhere between $0 -$100k per incident with most doctors opting for higher deductibles due to lower premiums. A deductible clause in a malpractice policy stipulates that the insurance company will not provide coverage for any expenses incurred by the insured for injuries or damages up to an agreed-upon amount. A deductible clause in a malpractice policy stipulates that the insurance company will not cover any expenses incurred by the insured for injuries or damages up to an agreed-upon amount per incident. The typical company’s deductible is usually $5000, but it can be higher, sometimes as high as $50,000 depending on individual state requirements and claims history.

How Much Does Tail Coverage Cost?

A good rule of thumb is tail coverage costs around 2 times your annual medical malpractice insurance premium.  Thus, if your annual premium costs $6000; your tail cost would be around $12,000.  Your tail insurance cost is a one-time payment; it is not an annual cost. 

The cost of insurance coverage is based upon the claims history of the provider and the number of individual and group patients seen per year. Providers with high annual visit counts will have a lower insurance premium, since their claims are spread out over more people. Thus, the choice of claims-made or occurrence is important.

Additionally, doctors who perform below average in terms of malpractice insurance claims will pay less than doctors who incur higher claim rates. A provider’s business risk profile is also taken into account when determining the rate an insurance company will charge for the occurrence-based policy. Provider age is also factored into the equation, as younger doctors are considered to be at higher risk of committing acts that could lead to liability or making an error than older practitioners.

Who Pays For Tail Insurance?

The physician’s employment agreement will specify whether the physician or the employer pays for the tail insurance.  This is a point of contention in many employment agreement negotiations with resources from both parties advocating for their position.   

Claims-made coverage is used in cases where there may be periods of time when coverage is not available, such as physicians changing jobs. In these situations, the tail policy will provide protection for up to three years after leaving an employer. The tail policy also has other limitations and exclusions which can make it difficult for physicians who leave employers often or have a history of high liability claims against them to find affordable malpractice insurance.

As with any type of insurance, it’s important that you understand what your tail covers before purchasing one. There are two types of tails – open and closed – each with their own benefits and drawbacks.

How Can a Physician Avoid Paying for Tail Malpractice?

• Negotiate for the employer to pay for it in the Employment Agreement.
• Have your new employer pay for your tail (referred to as nose coverage).
• Stay with the same insurance carrier and the tail will get rolled into a new policy.

Claims Made Resources

Physician Claims-Made Insurance is a type of medical malpractice insurance purchased from an insurance company which provides legal defense to the physician from medical liability arising from clinical care that results in a patient’s injury or death. Each policy provides limits; which are the maximum amount an insurance company will pay per event. Thus, if your insurance policy has a limit listed of $1,000,000 per occurrence, that is the maximum amount your medical malpractice insurer will pay towards any claim filed within the term outlined in your policy.

A claims-made policy will only provide insurance coverage if the policy is in effect when both the incident first happened and when a lawsuit is filed against the doctor (when the claim is made). Thus, there is a chance a lawsuit can be filed after a physician leaves an employer. In situations like this, with claims-made medical malpractice insurance, a tail policy must be purchased by the medical provider which covers the gap between when physicians leave an employer and when the statute of limitations on filing a medical malpractice claims ends.

Medical Employment Contract Attorney

Contracts are a pervasive and obligatory part of nearly all business and legal transactions. Well-drafted contracts help to enumerate the responsibilities of the involved parties, divide liabilities, protect legal rights, and insure future relationship statuses. These touchstones are even more crucial when applying their roles to the case of a physician employed by a hospital, medical group, or other health care provider. While contract drafting and negotiation can be a long and arduous process, legal representation is a must in order to ensure that your rights are being protected.

The present-day conclusion is simple: A physician should not enter into any contract without having the agreement reviewed by legal counsel.

There is simply too much at risk for a physician to take contract matters into their own hands. In addition to the specific professional implications, contract terms can significantly impact a physician’s family, lifestyle, and future. There are many important contract terms and clauses which can present complex and diverse issues for any physician, including:

• Non-compete clauses
• Damages
• Indemnification
• Verbal guarantees
• Insurance statements

Additionally, often times the most influential terms and clauses in any employment contract are the ones that are not present. With the advent of productivity based employment agreements it is imperative that any physician have an employment agreement reviewed before it is executed. Attorney Robert Chelle has practical experience drafting and reviewing physician contracts for nearly every specialty.

New residents, attending physicians, doctors entering into their first employment contract or established physicians looking for new employment can all benefit from a thorough contract review. By employing an experienced attorney for your representation, you can insure that you will be able to fully understand the extensive and complex wording included in your contract. By having a full and complete understanding of the contract, you will be in a better position to make your own decision on whether or not you want to enter into the agreement which will affect your career life for years to come.

The financial benefits gained from having your contract reviewed and negotiated by an experienced healthcare attorney far outweigh the costs associated with a review. You are a valuable resource, and you should be treated and respected as such. Attorney Robert Chelle will personally dedicate his time to make sure that your are fully protected and will assist you in the contract process so that your interests are fairly represented.

Every physician contract is unique.  However, nearly all contracts for health care providers should contain several essential terms.  If these essential terms in the contract are not spelled out in contracts, disputes can arise when there is a disagreement between the parties as to the details of the specific term.  For instance, if the doctor is expecting to work  Monday through Thursday and the employer is expecting the provider to work Monday through Friday, but the specific workdays are absent from the Agreement; who prevails?

Spelling out the details of your job is crucial to avoid contract conflicts during the term of your employment.  Below is a checklist of essential terms that contracts should contain (and a brief explanation of each term):

1. Locations: Which facilities will you be scheduled to provide care at (outpatient clinic, surgical sites, in-patient services, etc.)?
2. Outside Activities: Are you permitted to pursue moonlighting or locum tenens opportunities? Do you need permission from the employer before you accept those practice of medicine related positions?
3. Practice Call Schedule: How often are you on call (after hours office call, hospital call (if applicable))?
4. Electronic Medical Records (EMR): What EMR system is used in the practice of medicine? Will you receive training or time to review the system prior to providing care?
5. Base Compensation: What is the annual base salary? What is the pay period frequency?  Does the base compensation increase over the term of the Agreement? Is there an annual review or quarterly review of compensation?
6. Productivity Compensation: If there is productivity compensation; how is it calculated (wRVU, net collections, patient encounters, etc.)? Is there an annual review?
7. Practice Benefits Summary: Are standard benefits offered: health, vision, dental, life, retirement, etc.?  Who is the advisor of human resource benefits?
8. Paid Time Off: How much time off does the job offer? What is the split between vacation, sick days, CME attendance and holidays?  Is there a HR guide?
9. Continuing Medical Education (CME): What is the annual allowance for CME expenses and how much time off is offered?
10. Dues and Fees: Which business financial expenses are covered (board licensing, DEA registration, privileging, AMA membership, Board review)?
11. Relocation Assistance: Is relocation assistance offered? What are the repayment obligations if the Agreement is terminated prior to the expiration of the initial term?
12. Signing Bonus: Is an employee signing bonus offered? When is it paid?  Do you have to pay it back if you leave before the initial term is completed? Are student loans paid back?  Is there a forgiveness period for student loans?
13. Professional Liability Insurance: What type of liability insurance (malpractice) is offered: claims made, occurrence, self-insurance?
14. Tail Insurance: If tail insurance is necessary, who is responsible to pay for it when the Agreement is terminated?
15. Term: What is the length of the initial term? Does the Agreement automatically renew after the initial term?
16. Without Cause Termination: How much notice is required for either party to terminate the Agreement without case?
17. Non-Compete: How long does the non-compete last and what is the prohibited geographic scope?
18. Non-Solicitation: How long does it last and does it cover employees, patients, and business associates?

Coming into a new organization with a favorable contract can put the physician in a positive financial situation for years to come. Before you sign the most important contract of your life, turn to Attorney Robert Chelle for assistance.

If you have questions about your current medical malpractice policy or are interested in having your employment agreement reviewed contact Chelle Law today.