Medical Malpractice Policies (also known as Med-Mal or Professional Liability Policies) come in two varieties: an (1) Occurrence Policy or a (2) Claims-Made Policy.
An Occurrence Policy only provides coverage for claims filed during the period of coverage. If a claim is filed subsequent to Policy termination, no coverage is provided. Thus, the vast majority of Med-Mal Policies are Claims-Made Policies.
Tail coverage (also known as an Extended Reporting Period) is a feature found within a Claims-Made Policy that permits claims to be made against the insured after a policy has expired or been canceled. The act that gave rise to the claim must have taken place during the period of coverage, but the Tail Coverage applies for a limited time period – generally one or two years. And it is expensive – typically 2.5 times the most recent annual premium of the Med-Mal Policy. So, if the annual premium the last year of the Policy was $10K – the Tail Coverage premium might be in the neighborhood of $25K.
If an employer terminates the Med-Mal Policy in favor of a new Policy – the employer will be responsible for securing Tail Coverage and paying the premium. But the question for many physicians is “who is responsible for paying the premium if my employment is terminated?”. If the Employer assumes responsibility – great.
But if a prospective employer presents an Employment Agreement stipulating the physician is responsible for the Tail Coverage in all circumstances – this is not fair and reasonable in our professional opinion. The circumstances surrounding the termination should come into play. For example, if the physician has successfully completed the initial contract term, or if the employer prematurely terminates the physician’s employment without cause – then our position is the employer should be responsible for the cost of the Tail Coverage.