Malpractice Insurance: What Physicians Need To Know
If you are just starting practice as an employee with a physician group, you may think you don’t really need to know that much about malpractice insurance. Few physicians have the resources available to defend against a malpractice claim when legal services can cost tens of thousands of dollars and damages or settlements can be hundreds of thousands of dollars. When deciding on a malpractice insurance policy, there are two types to take into consideration: a claims-made policy or an occurrence-based policy.
An occurrence-based policy provides insurance against incidents that occurred during the term of the policy regardless of when the claim is made. A claims-made policy covers the insured for any incidents that occur during the policy period, as long as the claim for the incident is also filed during the policy term. Neither of the policies will provide coverage for incidents that occur before the inception date of the policy.
Tail insurance refers to a policy that the insured can purchase when he discontinues his claims-made policy. The tail allows the insured to report claims for incidents that occurred during the time the policy was active (from the retroactive date to the policy expiration date) even though the policy has been terminated. Tail insurance is generally a onetime payment.. If a physician decides to change employment, wants to continue practicing medicine, and requires a new malpractice policy, tail insurance will be required to continue coverage for all incidents that may have occurred under the old policy. Many claims-made policies offer “free” tail coverage for death, disability, or permanent retirement.
Based on this information alone, it would seem logical that an occurrence-based policy is the best option. However, the two types of policies vary greatly. Depending on how mature a policy is, and the specifics of the policy, the sum of all claims-made premiums along with the cost of tail insurance can approach the sum of all occurrence-based premiums over the same period. If it can be determined that a physician will be eligible for free tail coverage (i.e., he is covered by the same policy through retirement), claims-made insurance is usually the most cost effective. If a physician knows there is a high likelihood of changing employment and malpractice insurance, he may want to compare pricing of the two options including the cost of the tail coverage in his calculations. For example, a physician may want to consider an occurrence-based policy if he knows he is going to work at a location for a short amount of time and will not be able to take the coverage with him.
What To Look For In A Carrier:
While premium costs can’t be ignored, a company’s fiscal soundness, claims handling, and sensitivity to policy holders are also important considerations. Ask about the carrier’s A.M. Best rating. Given the current state of the medical malpractice climate, a rating of A minus is good. Your state insurance commissioner’s office can provide information about insurers licensed in your state and may also be permitted to give information about complaints that have been filed against the insurer.