What is mediation in a physician employment contract? In nearly every physician contract, there will be a couple of things about what happens if there is a dispute. Everyone goes into a contract hoping it’s the most excellent relationship of all time. Unfortunately, this doesn’t always happen. And so, if there is a dispute or you think that one party thinks the other is in breach of contract or can’t meet in the middle.
What Law is Used?
Usually, the contract will state a couple of things. One, it will say what law is used. It should be the law of the state in which you are residing. I’ve seen a couple of larger corporate-owned physician groups that may have physicians in dozens of states, and they’re based in Florida. The contract will state that although the agreement is taking place in Texas, Florida law will hold. I mean, no one should agree with that. The laws of the state where you’re working should be the venue for any dispute.
It may even expressly state that Maricopa County is the Phoenix area and surrounding cities here in Arizona. And so, it may say in the contract that any lawsuit brought must be filed in the superior court with Maricopa County. That’s not unreasonable as well. It can state if there is an issue, and that’s where it will be filed. Other contracts will say that there must be a dispute resolution process. So, instead of someone just going straight to court and filing a lawsuit, they’ll state there must be an accelerated dispute resolution. And in the legal field, dispute resolution is generally two things: mediation and arbitration.
Medical Malpractice Mediation
Mediation is non-binding arbitration. What that means is usually, a lawyer, maybe a retired judge, will attempt to reach a compromise between both parties. However, if both parties are unhappy with the outcome or unwilling to compromise, nothing binding results from it. Usually, in a medical mediation, what happens is both parties will split the cost of the mediator. And as I said before, it’s a lawyer or retired judge. Then, usually, they’ll keep them in separate rooms.
And the mediator will then go to one side and say, what’s your position on this? Then they’ll go to the next room and say, alright, what’s your job? And then will go back and forth saying, well, maybe you’re being unreasonable here. Maybe you might want to think about this. And they’re just trying to get both parties to meet in the middle and squash any beef they have.
Next Step if Mediation Is Not Successful
But if it is an unsuccessful medical mediation, it can go one of two ways. It could either go to arbitration, which is essentially binding mediation. In arbitration, the same process, an attorney or retired judge will hear both sides of a case. In arbitration, they’ll render a binding decision. Both parties are bound by whatever the decision is. And it’s outside of the court system. I find almost every hospital network employee in an arbitration agreement within the employment agreement.
It will state any disputes arising from this agreement, sometimes accepting the restrictive covenants. So sometimes, the non-compete or non-solicit will have to go through the court system. It will be part of the arbitration agreement. But anyway, it’ll say, if there is a dispute, both parties must go to arbitration, and then it will state what kind of arbitration. It could be JAMS. It could be AHLA or the American Health Lawyers Association. Or it could be the arbitration system of whatever county where they are residing.
How Arbitration Works
And so, arbitration works typically because both parties will agree on a neutral arbitrator. They’ll provide a statement to the arbitrator in advance and maybe submit documents if they’re necessary. The arbitrator will come in, and then the same process happens. They’ll meet with both sides and then render a decision. Generally, it’s a brief written decision of this is what’s going to happen. Now, if there isn’t medical mediation or arbitration, it simply goes to litigation. If the parties can’t reach an agreement, either party is free to sue them in whatever venue is specified in the contract.
Downsides of Mediation
There is no downside to mediation. It is not binding. It’s because it’s considered a settlement. Whatever is stated within those settlement talks is confidential and can’t be used against either party. Suppose it does accelerate into arbitration or litigation. In that case, I find it’s a meaningful process to flush out what the actual cases are. Like what really is the bottom-line problem, and then having somebody skilled in mediating and trying to get both parties to compromise is a valuable process.
Now, dealing with doctors daily, I understand there are some hard feelings at times. And some people say not. I don’t want to mediate; I want to bring out the big guns and go right into litigation. And that’s very prerogative. That’s fine. But I think the mediation process can be fair and helpful in many ways. So, that’s kind of what mediation is in a physician in an employment agreement.
Other Blogs of Interest
- Can I Quit my Job if I Signed a Contract? | Career & Contract Termination
- What is Arbitration in a Physician Contract?
- What Should be in a Telehealth Contract?
Can Physicians Terminate a Contract Without Notice?
Can a physician terminate an agreement without notice? In my mind, that just simply means can they leave a job without any amount of notice and then move on without repercussions? The answer is that you can go without notice. Still, there will be legal implications, and you are opening yourself up to liability for a few reasons.
The first reason is that there will be a termination without-cause clause in almost any physician employment agreement. Sometimes it’s called for no good reason. And in that scenario, the physician contract will state that either party can terminate the agreement with a certain amount of notice to the other party. So, terminated physician contracts don’t need a reason, no one has breached the physician contract, or maybe nothing is wrong.
It’s just the physician who wants to move on. Or maybe the employer is laying off the physician due to lack of volume or something like that. The physician contract will state either party can terminate the physician contract for any reason. However, they must provide a certain amount of notice, as stated in the physician employment physician contracts. Most of the time, it’s either 60 or 90 days. That’s the standard. In that scenario, let’s say the physician wants to leave.
They would, in writing, provide notice to the practice that says, under the physician contract, I’m giving you 60 days’ notice. My last day of providing care will be X date. And then you move on with your employment. Now, just because the physician contract was terminated without-cause doesn’t mean there aren’t some problems for you or at least cases that you need to deal with when it’s over with
Things to Consider in a Physician Employment Contract Termination
Some things that will follow when you terminate a physician’s contract without-cause, or at least usually follow, there will be a restrictive covenant. And that is either a non-compete or non-solicit in the physician’s agreement. In terminating an employment agreement without-cause, they will still apply. And so, you need to think about, alright, what are the restrictions on my practice after I leave the employer? Many employers will have repayment obligations for bonuses they’ve paid out.
If you start employment, then you leave within a year or two. The employer will prorate that bonus based on how long you’ve been there since you started. Let’s say you were given a $30,000 signing bonus and your initial term was three years. Then the employer may say that one-third of that $30,000 is forgiven yearly. So, if you were to leave between years two and three, you’d owe them back $10,000 at the end of the physician contract. And same goes for relocation assistance. They gave you some money upfront. Usually, it’s forgiven over time. Then you’d have to pay back whatever the outstanding amount is.
What if Your Physician Employment Contract Includes a Productivity Bonus?
Another thing to think about if you terminate a physician contract without-cause is if you have a productivity bonus in the physician contract, either net-collections or RVU. Many will state that if you’re not employed when the compensation is given out, you will not get it. Or maybe if it’s like an annual bonus, they won’t prorate it either. The timing of when you give that notice is essential so you’re not losing out on whatever productivity bonus you earned.
What Will Happen if Your Medical Contract Contains a Claims-Made Policy?
And then kind of the last thing that can usually follow is if you have a claims-made policy, who’s going to pay for tail insurance? If the physician is responsible for tail insurance, they must pay that amount before the contract ends. And that can usually be somewhere between ten and a hundred thousand for OB-GYN or maybe a high-level surgeon.
What Are the Effects of Terminating a Physician Contract Without Notice to the Employer?
What happens if you don’t provide notice to the employer? In the physician contract, as I said before, there will be a clause that says you can terminate the physician contract without-cause with this amount of notice. So, what happens if you don’t give any notice? You walk in on a Monday and say this job sucks. I’m out of here. You walk out, and that’s it. Well, you’re in breach of the physician’s contract. What are some things that can happen when you breach physician employment contracts? Well, the employer could assert damages.
Meaning lost revenue for the patient that you would’ve seen that they don’t have coverage for recruitment fees for replacing the physician. Also, expenses are incurred when there’s no physician to be there with staffing or vendors. And so, how that would work is that the employer would sue the physician for breach of physician contract. Then they would claim those damages, then fight it out in court, or if there’s an arbitration clause, they will arbitrate. It’s a terrible idea to walk out on an employer if there’s a without-cause termination clause.
Physicians, Remember Continuity of Care for Patients
Another consideration is continuity of medical care for your patient. If you were to leave a job without providing any notice, what will happen to your patient? Although employed, they may be your patients. They are the employer’s patients. So, the physician couldn’t just up and take all the patients to a new practice for a couple of reasons. There’s probably a non-compete and non-solicit that would prohibit that in some legal way.
Now, a patient can choose who their provider is, and I’m not going to get into that right now. But the continuity of treatment aspect is something that needs to be considered. Are there bridge scripts written if they’re maybe psych patients absolutely in need of medication? Has there been any opportunity to refer the patient to someone else? Is there someone in-house who can take over the patient? Not only could you get sued for damages, but if you just up and leave all the patients in the lurch, you’re also asking for a board complaint, and nobody wants to deal with their state board.
I promise you I’ve represented hundreds of professionals before the licensing boards, and it’s not a fun process for a provider. So, can you terminate a physician’s employment contract without any notice? Yes, but it’s a terrible idea that could open the physician to many problems.
What Can You Negotiate in a Physician Contract?
What can a physician negotiate in an employment contract? The short answer is everything. It ultimately depends upon the willingness of the employer as to whether they’re willing to negotiate terms or not. Extensive hospital networks are less likely to change an employment contract agreement significantly. Unlike if a physician is looking into a physician with a smaller physician-owned practice, there’s much more leeway for significant changes. What are the things that are important to the physician, and then what are the things that they can get changed?
In my mind, when I’m talking to a physician, the things that stick out as the most important would be:
- the signing bonus,
- relocation assistance,
- how to terminate the contract agreement,
- making certain there’s without-cause termination that’s a reasonable length,
- productivity bonuses,
- tail insurance and,
- who pays for tail insurance if it’s a claims-made policy?
Physician Contract Negotiations
Let’s go through each of those and come up with some tips on negotiating. First, as far as compensation goes, the physician needs to know their and their specialty’s value. Getting the MGMA data is helpful. It is beneficial to talk to colleagues about what they’re being offered or what they’re currently making in different organizations. Sometimes, the associations for each specialty can provide information on your specialty’s average salary. That’s one way to look at it. As far as productivity goes, this is a little more difficult. It’s going to be completely based upon, I guess, the arrangement. Is it kind of a hybrid between a base salary and RVU production? A base salary and net-collections? Is it all RVU? Is it all net-collections?
This one is dependent upon the type of structure. You’re getting a base plus a certain amount of net-collections or a hybrid model. Let’s say. For instance, the expectation was 20,000. Anything collected is over 20,000 by the practice, and the physician will get 15 to 25% of that. That would be a standard percentage. If the physician is purely on net-collections, around 40 to 45% is average. As far as RVUs go, there are two things you can negotiate: the threshold, meaning how many RVUs you must generate to get a certain amount, and the compensation factor, which is the monetary value associated with the RVUs. That has some leeway as well. Regarding signing bonuses and relocation assistance, the main things are the actual number, obviously, but more importantly, what’s the repayment schedule?
Forgiveness Period in Physician’s Contract
Almost every contract is going to have a forgiveness period. Let’s say the physician gets a $20,000 signing bonus, and the initial term of the contract agreement is two years. Usually, they’ll have to stay for that initial two-year term to have the entire $20,000 forgiven, so they don’t have to pay anything back. The same goes for relocation assistance. Between $10,000 and $15,000 should be the cost of relocation assistance. The signing bonus can vary widely from 10 to 75. That one is specialty-dependent. As far as non-compete goes, this does vary state by state on what’s considered reasonable. There are a few states where it’s wholly unenforceable; California and Mexico, for instance. Usually, the non-compete shouldn’t be any longer than a year. The geographic restrictions should be 5 to 15 miles from your primary practice location. Where to negotiate with this?
Terms That Matter for Physician Contracts
You want to keep the length at one year or shorter. You want the non-compete to only apply to a few locations. Some employers will say the non-compete applies to every facility we own in the city. Instead of having one office within 10 miles, you could have 30. So, that’s very important. And then specialty as well. Some specialties can do multiple things. Let’s say you are in internal medicine. You can be a hospitalist, and you can go into family practice. You can do urgent care. If the non-compete states that you can’t practice medicine within that geographic restriction, you’re out of luck. Whereas if you keep it to the specialty of what you’re providing to that employer. Specifically, in this case, let’s say you are a hospitalist.
You could go to family practice or urgent care for a year, and then when the non-compete ends, go back to being a hospitalist. That’s something to consider. And then malpractice insurance is always a considerable discussion with the physicians’ coworkers. First, you must identify whether it is a claims-based or occurrence-based policy. If it’s a big hospital, they might be self-insured. And after you determine what type it is, if it is a claims-made policy, tail insurance will need to be purchased after the contract terminates. And then who pays for that? Most of the time, if you’re in a small private physician-owned practice, the physician must pay for tail insurance when they leave. You rarely have to pay for tail insurance with an extensive hospital network. Now, tail insurance usually costs about twice what your annual premium is.
Physician Employment Contracts & Negotiation Tips
Your family practice’s annual malpractice premium is somewhere between $6,000 to $8,000. If you had to pay for tail insurance, it’s somewhere between 12,000 to 16,000. One thing you can negotiate is who pays for tail insurance coverage. Sometimes an employer will say if you’ve been with us for one year, we’ll pay for a quarter, then two years, half, and then three years, 75%. Some ways of getting out of having to pay the entire amount depend on the situation. Now, the first thing I talked about was whether the employer was willing to negotiate or not. Some employers will say this is a take-it or leave-it deal. I don’t think those employers will be great for getting together. If an employer is unwilling to budge on anything, it will likely be challenging to team up.
It means they’re not going to accommodate the physician somehow. So, I caution any physician who has been given a job offer. We ask for some clarification or certain concessions, and they say no, this is it. That’s usually a red flag. And I tell the physician that you may want to continue looking for a job because this might not be a good fit for you. Anything in the contract is negotiable. You need to figure out what’s most important to you. Sometimes, a non-compete is absolutely the number one thing. For others, it’s the compensation. For others, they do not have to pay tail insurance. It depends upon the physician’s wants and needs and then tailoring the negotiations to get them to that point.
Tail Insurance for a Physician Assistant Explained
What is tail insurance for a physician assistant? The setting of where the physician assistant is employed usually will dictate what type of professional liability insurance they have, also known as medical malpractice insurance. Suppose a PA works for an extensive hospital network. In that case, generally, the hospital network will be self-insured, and tail insurance won’t be necessary. If they work for smaller, standalone hospitals, that facility might use claims-made insurance. Still, most of the time, like nine times out of 10, if the hospitals or a hospital network employs a PA, they will not have to pay for tail insurance. Suppose they’re working for a smaller physician-owned group. In that case, that’s the setting where it’s most likely claims-made insurance is used, and then the PA would be responsible for paying for tail insurance.
Two Types of Professional Liability Insurance for Physician Assistants
Let’s kind of break down all these terms. First, in a smaller physician-owned setting, there are two common types of medical malpractice insurance. One is occurrence-based, and the other is claims-made. An occurrence-based coverage means a policy must be in place when a medical malpractice incident occurs. Tail insurance is not necessary for an occurrence-based policy. Now, why would you get claims-made versus occurrence?
A good rule of thumb is an occurrence-based is usually about a third more expensive than claims-made coverage. Smaller physician-owned practices usually use claims-made insurance just because it’s cheaper. And then they’ll pass the cost of tail insurance onto the employee. And therefore, they are saving a third a year on medical malpractice costs and giving the tail insurance coverage responsibility to the PA.
Claims-made vs. Occurrence-Based Policy
In occurrence-based coverage, you don’t need tail insurance. When you need tail insurance, if there’s a claims-made policy and a claims-made policy means a policy must be in effect when the claim is made. Now, someone could leave an employer, and then there will be a statute of limitations: the amount of time somebody can sue the Physician Assistants. In most states, it’s two years from where you know or should have known of the medical malpractice incident. T
Here are some exceptions for minors and things like that, but let’s use two years, for example. In that scenario, the Physician assistants leave the employer, and then a year later, somebody sues them. If they have a claims-made policy, that policy ends when they leave the employer. So, they need a gap policy, a tail insurance coverage that covers that gap between when they leave, and the last day somebody can sue the PA. As far as cost goes, a good rule of thumb is that tail insurance is usually about twice the annual premium.
The yearly premium is the amount the employer pays to insure the PA annually. Usually, somewhere between 1500 to 3000 is an excellent standard amount for medical malpractice coverage for a PA. If they had to pay, it’s somewhere between 3,000 to 6,000. It is specialty-dependent. There are different risks for someone assisting in surgery versus someone just doing primary care. Or if you’re with an OB-GYN or something like that, it would be higher as well.
The Price of a Tail Insurance
But just a good rule of thumb is somewhere around twice what the annual premium is. You want to find out, alright, what’s the annual premium? Is the employer paying my annual premium? Which they should be. And then, in the contract, it will state who’s responsible for purchasing tail insurance. That is a scenario that a physician assistant can negotiate. You can do a math equation if the employer gives the physician assistant the option of getting occurrence or claims-made coverage. If you’re going to be there for a short period, it might make sense to get occurrence insurance. Whereas if you are going to be there for a very long time, doing the math, it could make sense to go for claims-made coverage. So, that’s a little primer on tail insurance for a physician assistant.
You need to make sure there’s language in the contract that states when the contract ends and who is responsible for paying if it’s a claims-made policy. Then just a couple more things, the tail insurance policy will need to be purchased before the end of the PA’s employment with the employer. Then it’s a one-time payment. You don’t have to pay for tail insurance yearly. You’ll pay all the amount upfront. Then you’re covered for whatever amount of tail insurance you purchase. You can’t purchase shorter tails or unlimited tail insurance at just a matter of cost.
How Does Tail Insurance Work?
How does tail insurance work? Suppose you are a high-level health care professional like physicians, NPs, PAs, and dentists. In that case, you will need medical malpractice insurance while practicing. And then, depending upon what type of coverage you have, you may need tail insurance. I’m just going to break down the common types of medical malpractice insurance. And then when tail insurance is necessary and the details of when it needs to be paid, how long it needs to be paid, how much it costs, that type of thing. The two most common medical malpractice insurance types in private practice are an occurrence-based or a claims-made policy.
When Do You Need Tail Insurance?
An occurrence-based policy must be in effect when a medical malpractice incident occurs. And in that scenario, tail insurance is not necessary. Under a claims-made policy, a policy must be in effect when the claim is made. It’s possible if a provider leaves an employer, there’s going to be a gap between their last day at work and then the last day somebody can sue them. It’s called the statute of limitations. For most states, it’s two years. There are some exceptions, but in general, two years is a good rule of thumb in this situation.
Let’s say for this case. It’s two years. So, if you leave the employer, there will be a two-year gap where someone can still sue you for what you did for that employer. And so, in that scenario, you need a policy that covers that gap, known as tail insurance in the industry. If you have a claims-made policy, you need tail insurance. If you have an occurrence-based policy, you don’t.
Who Should Purchase Tail Coverage?
The employment contract will dictate who pays the underlying premium if you have a claims-made policy. Ninety-nine out of a hundred times will be the employer if you’re an employee and not an independent contractor. And then, the employment agreement will also cover who pays for tail insurance. Now, this can vary significantly from contract to contract.
Suppose you are working for the private physician-owned practice. I would say, more likely than not, that the provider will be responsible for paying for tail insurance. A physician-owned practice would rarely pay for tail insurance. I’d say maybe 75% versus 25%. So, 75% must pay for their tail insurance. In the contract, it’s going to state, alright, the physician is responsible for paying tail insurance. Let’s kind of break down the details of that.
The tail insurance policy will need to be in place before the end of the employment relationship. So, let’s say the physician gave notice, and there’s a 60-day without-cause termination. They will have to get that policy secured before the end of those 60 days when they leave.
Average Tail Coverage Cost
Tail insurance generally costs about twice what your annual premium is. This varies based upon specialty. So, if maybe your primary care, it could be around 5,000 to 6,000. Whereas if you’re an OB-GYN, it could be 40,000 or 50,000 yearly. A good rule of thumb is twice the annual premium, which you will have to pay for tail insurance. It’s a one-time cost.
You’re not going to have to pay it every year. Still, you will have to pay all the money upfront to purchase the tail insurance before the end of the employment relationship.
How Long is the Duration of a Tail Insurance?
Now, how long does tail insurance last? Well, it depends on what type of policy you bought. You can purchase one-year tail insurance, two-year tail insurance, five-year tail insurance, and unlimited tail insurance.
In my opinion, it seems shortsighted to purchase short tail insurance. Why would people do that? Well, it’s just a cost. Now, I said two times is the average. Still, it can range anywhere from 1.5 to 3 times the annual premium based on how long the tail insurance is. And then also, how long you’ve been with the employer and that type of thing.
Determining how long you should get should be easy. It should be unlimited tail insurance; it should go on forever. You don’t want a scenario where you are not covered when a claim is made. And that could be financially crippling for a physician or health care provider if they’re ultimately found guilty or must reach a settlement.
Add Tail Coverage to Negotiations With Your New Employer
Now, you can negotiate who pays for tail insurance coverage in the employment agreement. If you go to the employer and say, hey, I’d like you to purchase my tail insurance, they may say no.
One strategy we’ve successfully asked the employer to forgive a portion of the tail insurance cost based on how long the provider has been with the employer. For instance, let’s say the physician has a three-year initial term. And complete the three years of negotiating with the employer is one way of getting out of having to pay for tail insurance.
Another will be if your new employer pays for your old tail insurance. That’s called nose insurance. Or this doesn’t work if you’re employed in the hospital network. Still, suppose you are with a private-owned practice and leave for another private-owned practice within that state. In that case, they use the same insurance carrier. Generally, the insurance carrier will roll over your old policy into your new one. Then you won’t have to purchase tail insurance.
Now, there’s no way you’re going to know. Okay, in my next job, when I leave this one, whether they have the same insurance or not, that’s another way of getting out of having to pay for tail insurance coverage.
So, that’s how tail insurance works. It just covers the gap between when you leave an employer. Then the last day somebody can sue you, it’s around twice the annual premium. And then, you can negotiate who ultimately is responsible for covering the expenses associated with it.
How is Tail Insurance Calculated?
How is tail insurance calculated? What is tail insurance? Under what kind of medical malpractice policy do you need it? And then how much does it cost? There are two common types of medical malpractice policies for health care providers. You have occurrence-based and claims-made. In a claims-made policy, you need tail insurance; if it’s an occurrence policy, you do not.
Two Common Types of Malpractice Insurance Coverage
Let’s talk about the differences between the two medical malpractice insurance. For an occurrence-based policy, a policy must be in effect when the medical malpractice incident occurs. There is no need for tail insurance in that scenario, and I’ll explain why.
In a claims-made policy, a policy must be in effect when the claim is made. And so, for an employee who terminates a relationship with an employer, there will be a period where somebody can sue them. In most states, it’s two years. It’s called the statute of limitations. And in this scenario, let’s say a physician leaves the practice, they’re no longer an employee, and they have a claims-made policy, and that policy is done.
Well, they need an additional policy called tail insurance that covers the gap between when they leave the employer and the last day an individual can sue them. There are some exceptions in some states when a minor becomes an adult and a few other scenarios, but let’s use two years as a standard amount here. The employment contract will state that the employer will pay for the underlying policy, assuming you’re not an independent contractor.
Who Will Buy Tail Coverage?
And then, it will also state who is responsible for tail insurance. Suppose you’re in private practice, like a smaller physician-owned group. In that case, they’re likely going to have a claims-made policy. And it’s also very likely they will make the provider pay for tail insurance when the contract ends. If it’s an occurrence-based policy, you’re good; you don’t have to worry about tail insurance when the contract ends.
Why Would Someone Get One Over the Other?
An occurrence-based policy is around one-third more expensive per year than claims-made. So, suppose it is a smaller physician-owned practice. In that case, employers usually use claims-made, so they pay a third less annually for the premium because they will be the ones paying for it. And then two, they’ll usually put the tail insurance cost on the provider. So, they not only pay less per year for the premium, but they also don’t have to pay for tail insurance, and it’s just cheaper for them. That’s why 9 out of 10 private practice owners use claims-made coverage. Some use occurrence-based, but it’s rare.
If you have a claims-made policy, and it is determined in the employment agreement that you are responsible for paying for tail insurance, let’s break that down. It will state that you must purchase a tail insurance policy before your last day of employment with the employer. Usually, it’ll also say how long the tail insurance policy must be.
How is Tail Insurance Calculated?
How To Calculate Tail Insurance? Different factors are considered. There are different lengths of tail insurance. You could have one year, two-year, five-year, or infinite, and then with each one, it’s a little bit more expensive. A good rule of thumb in calculating tail insurance costs is about twice your annual premium. Let’s say you’re a family practice physician. On average, your annual premium, so how much it costs to insure you each year, will probably be about $6,000. And so, if you had to pay double that, the tail insurance calculation would be $12,000.
Now, that’s a one-time payment. You do not have to pay it annually. You give it all at once, and then you’re covered for how long the tail insurance is. If it’s up to you how long the tail insurance lasts, it makes sense to get an indefinite tail insurance policy. You are rolling the dice if you have one-year tail insurance. Still, the statute of limitations is longer than a year because you’re uncovered for that period. And if you do not have malpractice insurance, they could come after you, potentially. And that could be catastrophic for a professional. Suppose it’s only a couple thousand dollars more. In that case, it’s simply worth it to get the most extended tail insurance policy you can. That way, it’s just one last thing you have to consider.
How Do You Get the Employer to Pay for Tail Insurance?
Well, ask them when you’re negotiating. I’d like you to cover the tail insurance expenses. They may say no. If they do, you could come back at them, and we’ve had some success saying, alright, well, you’re not going to pay for all of it. What if we do it like forgiveness over the initial term? What I mean by that is, if you signed a three-year contract, you would say, alright, for every year that I complete for you, one-third of the cost of tail insurance will be covered by you.
So, after three years, when I’ve completed the initial term, you will be responsible for paying for tail insurance if I leave any period after that. You could also have your new employer pay for your tail insurance. That’s called nose coverage. And then the last way of not having to pay for it would be if you stay with the same insurance company with your new position. They’ll generally roll over your old policy into a new one. In that way, you don’t have to pay for tail insurance. So, that’s a little primer on how tail insurance is calculated.
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