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.