Prior Acts (Retroactive) Coverage Key with Medical Professional Liability Policies

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Tom Murphy

Medical malpractice insurance stands out from other forms of insurance because of the number of technicalities and details included in the professional liability policy. One reason for this is that the policy doesn’t just cover a medical professional’s present actions, but past actions as well.

“In Florida, we have a two-year statute of limitations for medical professional liability claims and lawsuits, but we also have the Statute
of Repose, which can extend the original statute another two years,” explained Tom Murphy, senior vice president, National Health Care Practice Danna-Gracey, a Division of Risk Strategies.

“This is so that, if a medical liability issue is found that may not have been discovered in the previous two years, the plaintiff can still file a claim or lawsuit against the physician or the facility responsible.”

Murphy gives the example of a patient who begins experiencing pain and discomfort more than two years after a surgical procedure and finds that the surgeon left a sponge in their body.

“In essence, doctors should just think of the statute of limitations as four years in Florida for patients 18 and older; for children, however, the statute covers them up until their eighth birthday if they are young, or up to the statute of limitations, whichever is longer,” said Murphy.

“Pediatricians and OB/gyns have a longer statute of limitations than those doctors who don’t see children, so it’s important that doctors know what limitations pertain to them because of their patient base,” he added.

In Florida, the vast majority of professional liability policies are “claims-made policies,” which is the trigger that gets companies started on defending doctors based on when the claim is reported.

“For example, Dr. Smith may see a patient in 2016, but the patient doesn’t file a claim until two years later, when they realize that something is wrong. The insurance company looks at the claim and reviews if the doctor has retroactive coverage to when the surgery took place,” said Murphy, adding that this type of coverage is also known as ‘prior acts coverage.’

This coverage is important not only for doctors, but for other medical professionals as well.

“Other healthcare professionals, like radiologists, should also hold claims-made policies, as they may miss a spot on an X-ray that later turns into cancer,” said Murphy. “A patient could come back and say that the radiologist should have recognized the cancer earlier.”

Retroactive Coverage vs. Tail Coverage While many physicians think that retroactive coverage and tail coverage are the same thing, they are actually two separate types of policies. Tail coverage is designed for professionals who cancel a claims-made policy, but still need protection for past actions.

“If a doctor moves from Florida to California and cancels the claims-made policy he’s had since 2010, he’s now going bare, unless he purchases a tail policy,” said Murphy. “He still needs protection in case someone makes a claim from Florida from the past four years or longer in the case of a minor.

“Some physicians will cancel their policies and not purchase tail coverage, throwing caution to the wind in hopes that there were no adverse events,” he added. “While it’s understandable because tail policies are expensive, it’s taking a real risk.”

A tail policy can cost an average of 200 percent of a current claims-made policy, meaning that if a physician held a claims-made policy for $10,000, it may cost them $20,000 for the tail policy.

“A lot of doctors don’t think about this when they decide to leave a group and go elsewhere or start their own practice,” Murphy added. “When they get a tail quote, they get sticker shock.

“This is why we advise practices who have a new physician joining their group to include information on tail policies—including the typical cost of obtaining one—in writing.”

Murphy added that medical groups should also review tail details with their carriers and prospective physician-hires to make sure that everyone is on the same page and fully aware of each party’s responsibility. Danna-Gracey is always happy to review tail details and provide guidance.

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