By Matt Gracey
Many doctors’ employment contracts require malpractice insurance
policy “tails” to be purchased so as to effectively turn a claims-made
policy into a more desirable occurrence form of coverage. In the last
year, for the first time ever, a healthy market for optional stand-alone
tail policies has developed. Instead of only being able to purchase a
tail policy from the incumbent insurer, there are now many choices. The
pricing can be greatly reduced, but most often the lower pricing means
coverage compromises as well as possible big differences in the
insurers’ financial ratings and standings. The biggest policy-term
difference we are seeing is the reduced term of the tail-policy
coverage.
Most standard-insurer tails offer coverage for any claims that are
made in the future, but the lesser-priced tails often offer only from
one to three years in coverage, which can be a significant difference in
states with much longer liability periods, such as Florida, which has a
liability period that goes out to four years or, in child cases, out to
the insured’s eighth birthday. Other policy differences are a less
desirable policy “trigger” and unfavorable consent to settle provisions.
Many of the insurers offering optional stand-alone coverage are in
the excess and surplus markets, some are not well rated, and some are
small, newer insurers with no A.M. Best rating.
Given that many employment contracts require a tail to be
purchased, make sure that your contract language clearly defines your
expectations so that inferior tail coverage from an inferior insurer
does not qualify unless all parties agree to that.
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