Claims-made policies are a type of medical malpractice insurance that covers a claim if:
- The claim is made while the policy is in force
- The incident that caused the claim happened after the policy’s retroactive date.
When you’re switching insurance carriers on a claims-made policy, it’s important to do the process correctly so you don’t experience a coverage gap. Fortunately, this is very simple to do as long as you know your options.
This guide explains how to cancel a claims-made policy without putting yourself at risk.
We also wrote an entire article about how to choose medical malpractice insurance, for physicians looking for coverage!
How To Avoid Coverage Gaps: Focus On Retroactive Dates, Prior Acts, Tail, and Binding
If you have a claims-made policy and are switching insurers or cancelling coverage, you must ensure you have protection for incidents that occurred while your policy was in effect. To do this, you must avoid a coverage gap. Factors that determine whether you have a coverage gap include:
- The retroactive date: This is the earliest date an incident can occur and still be covered, acting as a cutoff point. It excludes coverage for claims arising from wrongful acts that took place before this specific date, even if the claim is filed while the policy is active. If you want coverage for past incidents, your new insurance policy must have the same retroactive date as the old one.
- Binding timing: Binding is when an insurance policy becomes active. To avoid a coverage gap, your new policy must start immediately when your old one ends without even a single day in between.
- Reporting requirements: With a claims-made policy, you must report any incidents that could give rise to a claim within the effective dates of the policy
- Disclosure of known incidents: When securing new coverage, you must report any known incidents that you believe might result in a claim, or any potential claims to avoid the risk of being denied coverage for those claims.
Fortunately, you have multiple options to avoid a coverage gap, so it’s very simple to do so as long as you understand your coverage choices. Prior acts and tail coverage are two options:
- Tail coverage provides an extended reporting period. You retain coverage for claims arising from incidents that occurred while the old policy was in effect, even if the claim arising from that incident is made after you cancelled coverage.
- Prior acts coverage provides coverage for claims arising from incidents in the past, before the effective date of your current policy. Prior acts coverage may or may not be subject to a retroactive date. A retroactive date is the earliest date for which an incident can occur to trigger coverage. In other words, a claim arising from an incident that arose prior to the retroactive date would not be covered.
Who This Guide Is For
This guide supports the following medical professionals who are switching malpractice carriers:
- Private-practice physicians: You’ll want to take steps to ensure continuous coverage.
- Physicians leaving employment for private practice or joining a new group: Changing jobs often means changing insurers, or changes in who is responsible for maintaining insurance coverage. You must avoid coverage gaps during the shift.
- Physicians with incidents or circumstances but no filed claim: Most insurers require you to disclose any incidents that might lead to claims when you apply for new coverage. If you don’t disclose potential claims or report them to a prior carrier, you could create a gap in coverage.
Claims-Made Switching: the Core Concept
Claims-made policies cover incidents as long as:
- The incident occurred on or after the policy’s retroactive date, if there is one, AND
- The claim was made while the policy was in force or during an extended reporting period.
If you have a claims-made policy, you can create a coverage gap even if there was no period of time when you didn’t have malpractice insurance.
The coverage gap exists if there is any period during which you performed clinical work that no insurer will cover you for. This can happen if both of the following are true:
- Your new insurer sets a retroactive date that doesn’t date back far enough, so your prior acts coverage doesn’t cover all the clinical work you did in the past while you had your old policy.
- Your tail coverage doesn’t extend the reporting period forward enough, so you aren’t covered for an incident that happened while you had your old policy because it is reported after the old policy ended and before your new coverage took effect.
Retroactive Date, Explained Fast
The retroactive date is also called the prior acts date. It’s the earliest date when your claims-made medical malpractice insurance policy covers an incident. The timing of the retroactive date determines if you have a coverage gap.
If you switch insurers, your new carrier sets its own retroactive date, as needed. Some of the most common retroactive date setups malpractice insurers offer include:
- Full prior acts coverage: This happens if your insurer does not set a retroactive date or if your new insurer sets your retroactive date to the same retroactive date as your old insurer. In either of these instances, you have full coverage for any past incidents. There should be no coverage gap.
- Limited prior acts coverage: Your new insurer may cover prior acts for a defined period, such as three years from the time the new coverage starts. If the new retroactive date doesn’t create a lookback window that’s long enough, you have a partial coverage gap.
- New retroactive date: Your new insurer may also restart your coverage with a retroactive date that is the same as the effective date. In other words, there is no lookback window. In this instance, you will have a coverage gap for all past incidents that occurred under your old policy and you must buy tail coverage.
Callout: Claim date, incident date, and report date all affect coverage. Say, you purchase a new claims-made malpractice insurance policy on February 1, 2026, with a retroactive date of February 1, 2023. Then, you face a malpractice claim with the following facts:
- Incident date: January 2, 2023
- Claim date: February 5, 2026
- Report date: February 7, 2026
The incident occurred before the retroactive date, so your new policy will not cover it. The date the patient made the claim, and the date you reported it, were both after you switched coverage so your old claims-made policy will not provide coverage unless you had tail coverage.
Prior-Acts vs Tail: the Decision Section
Since both prior acts and tail coverage allow you to avoid a coverage gap, you should know how to decide between them.
Prior Acts Coverage:
- Definition: Prior acts coverage or nose coverage provides a retroactive date in the past that matches your original policy. Retroactive coverage can be built into your new policy so your new insurer pays for incidents that happened while insured by your old carrier, as well as current incidents.
- How long does coverage last: Prior acts can cover you as far back as the date you purchased the old insurance coverage. In fact, you must ensure your new insurer has the same retroactive date as your old one to avoid a coverage gap.
- Cost structure: The cost of prior acts coverage may be built into premiums with your new insurer with no separate charges. Carriers sometimes offer “free” prior acts coverage to entice you to switch but they factor this in when setting your premiums. Prior acts coverage usually costs less than tail coverage.
- Underwriting: Your new insurer takes on unknown historic risk when offering prior acts coverage, so your past record will be scrutinized.
- Who pays: Your new employer may, but isn’t required to, pay for prior acts coverage
- When to use: Prior acts coverage may be the best option when your new insurer agrees to match the retroactive date of your old policy because it usually costs less than tail coverage. Underwriting plays a role in establishing premium costs.
Tail Coverage
- Definition: Tail coverage is purchased from your departing carrier or from a standalone insurer. You pay a lump sum for the tail coverage and choose how long the protection is in effect. Tail coverage pays for claims arising from incidents when the old coverage was active, up until the time the extended reporting period ends.
- How long does coverage last: Typically, tail coverage lasts anywhere from a year or two after you’ve cancelled your policy to an unlimited period of time (lifetime tail).
- Cost structure: Tail coverage is paid as a lump sum to the insurer. Premiums vary depending on risk profile, but a five-year tail policy in a high-risk specialty could cost 150% of your final annual premium, or more. Longer tail coverage costs more.
- Underwriting: Underwriters assess the risk of past negligent or wrongful behavior. You’ll likely be asked to warrant that you’re unaware of any facts or circumstances that could lead to a claim.
- Who pays: You may pay for your own tail coverage, especially if you’re retiring or leaving the industry. Some hospitals or large employers also cover the cost as a hiring incentive.
- When to use: Tail coverage makes sense if your new insurer refuses to provide the same retroactive date as your old one or if you’re leaving the profession and don’t need a new malpractice policy.
Special Circumstances That Affect Your Decision
Certain special circumstances may change your decision on whether to get tail coverage or prior acts coverage. Examples include:
- When your new insurer won’t match the retroactive date on your current policy. If your new coverage doesn’t extend back to the date your old coverage started, this creates a coverage gap where no insurer is responsible for incidents that occurred under the old insurer but that were reported after you cancelled coverage.
- When your new role is very different. If you expand the scope of your work or fundamentally change it, your new insurer may decide only to provide prior acts coverage for the old specialty and not cover you for the new work.
- Gaps in continuous coverage: If your policy lapses at any point, insurers may not be willing to offer prior acts coverage for clinical work done prior to the lapse. This isn’t the case for all carriers, but it’s the case for many and you must disclose lapsed coverage in writing.
Switching Checklist: By Phase
Since changing malpractice insurance coverage could leave you vulnerable to legal liability if you don’t understand the coverage rules, it’s important to remain organized during the process. This step-by-step guide will help.
Before Requesting Quotes
Preparing in advance will help you to get accurate quotes and to quickly provide information carriers need to evaluate and price coverage. Steps to take before requesting quotes include:
- Confirming the exact name of the entity on your current policy
- Confirming whether the policy is an individual policy or group policy
- Listing states where you’re licensed and have practiced
- Documenting your clinical hours and clinical volume for the past three years
- Finding your current declarations page to confirm current policy terms, including the retroactive date
- Collecting endorsements attached to your current coverage. These are riders that alter the standard insurance contract such as administrative coverage or tail coverage
- Requesting a claims history letter or loss run letter from your current insurer. Your new carrier may require between three and 10 years of claims history. If you haven’t made any claims, you can get a letter of no known claims
- Listing any demands or incidents you’re aware of but haven’t reported yet so you can disclose them to your new carrier
While Comparing Quotes
When comparing quotes, you must make sure that the coverage is comprehensive. Some key things to look for include the following:
- Whether the retroactive date matches your current policy. If the new policy covers prior acts, get the retroactive date in writing.
- Whether the covered entity matches the name and structure of your practice.
- Exclusions for prior clinical work such as past incidents or specific procedures.
- Whether the policy requires your consent to settle claims
- Whether the policy includes a hammer clause that imposes financial penalties for refusing recommended settlements.
- Reporting requirements including the timeline for reporting incidents or claims
- Per-claim and aggregate policy limits, including any sublimits applied to specific procedures or specialties.
Right Before Binding
Binding means your coverage goes into effect. Immediately before binding, take these steps:
- Confirm the date the new policy takes effect is the same day the old policy is cancelled. Avoid an overlap that leads to coverage disputes or a gap that puts you at risk of personal liability
- Get written confirmation of prior acts coverage and the retroactive date to ensure there’s no coverage gap
- Report any known incidents or circumstances to the new carrier so you don’t void prior acts coverage due to failure to disclose and then, where possible, also report them under any expiring policy to preserve coverage under that policy before it expires and you move on to the new carrier
- Confirm that the named insured and the entity type are correct
Don’t cancel your old policy until you have written confirmation that your new policy is bound. If you have purchased tail coverage don’t cancel until you confirm the timeline of the extended reporting period, the costs of the policy, and the reporting requirements.
After Binding
After binding, you’re officially covered by the new insurer but still must complete certain tasks to stay protected. Here are the steps to take:
- Save your new declaration page, written confirmation of prior acts coverage and your retroactive date, and all endorsements in a safe place.
- Keep copies of your old insurance policy, its declaration page, and any endorsements in case you need to document coverage in the future.
- Keep all correspondence with both your old and new insurer.
- Keep a copy of your claims history letter.
- Take note of your new policy’s reporting requirements so you’ll know when to report any incidents
- Set a calendar reminder to review your coverage each year at the renewal date.
7 Common Ways Physicians Lose Coverage Unintentionally
Losing coverage puts you at risk of personal liability for claims. Here are seven common ways this can happen to physicians.
- Your retroactive date resets without noticing: Most insurers set the retroactive date as the date the policy begins unless you request prior acts coverage. If you don’t confirm the retroactive date and avoid a coverage gap, you could have years of clinical work you’re unprotected for.
- There is a cancellation effective date mismatch: If the cancellation date of your old policy is before the date your new coverage takes effect (including prior acts coverage), you’ll have a period of clinical work that isn’t covered.
- You misunderstand the reporting window: Insurers have a reporting window or time deadline for reporting claims. Typically, this is around 30 to 60 days, although some insurers require reporting as soon as practicable. Failure to report in a timely manner can result in a claim denial even if the incident occurred while the policy was in effect.
- Your policy doesn’t have a prior acts endorsement: If you have a prior acts endorsement, make sure it’s part of your policy contract and your retroactive date is in writing. Even if you have a verbal agreement with a broker, the policy language controls so confirm you have the proper endorsements.
- You fail to disclose known circumstances properly: If you’re aware of a bad outcome or problematic incident, you must disclose it when applying for a new policy even if no claim has been made. If there’s a known-pre-existing circumstance you don’t disclose, the incident could be excluded from coverage. To be safe, where possible, you also want to report known potential claims under your expiring policy before you move on just to ensure your coverage is triggered and protected
- Your coverage is narrowed by exclusions tied to prior work: Sometimes, insurers exclude specific procedures, treatments, subspecialties, or locations from coverage, especially if underwriters determine the specific clinical work is high risk. If you don’t realize certain parts of your work aren’t covered, you could be without protection for it
- You change your entity or ownership without confirming the new policy has the right named insured: Business structure matters when you buy coverage. If you were employed and an additional insured on your employer’s group policy, questions can arise regarding who pays for prior acts coverage or tail coverage. This will be determined by your employment agreement. Often, your employer pays for tail coverage unless you voluntarily resign or another arrangement is made.
Any policy terms you negotiate to avoid coverage gaps should be in writing.
Leaving Employment for Private Practice or a New Group
If you leave your current employer and join a new group or enter into private practice, this can create questions about who must pay for insurance coverage. Here are some common arrangements:
- Employer pays for tail: This is common when you go work for a large employer such as a hospital, if you are in academic medicine, or if you’re terminated without cause.
- You pay for tail: You may pay for tail if you voluntarily resign from your job and your new employer doesn’t provide prior acts coverage or if you go into private practice and don’t have a new employer.
- Tail costs are shared: You can negotiate the cost with your past employer, potentially splitting the fee with your employer covering a certain percent based on years of service
Regardless of which approach you take, you must get the details in writing including:
- Whether prior acts are covered (and the retroactive date if they are) or whether you need tail coverage
- Who is responsible for covering tail costs under what specific circumstance
- How long tail coverage will last
- What triggering events, like termination or voluntary resignation, could affect responsibility for paying for tail coverage
- What tail carrier will provide coverage. Usually, the paying employer decides this, but you may want to negotiate to ensure that the insurer is reliable and has at least a certain minimum A.M. Best rating
- Your right to receive advance notice if your employer’s policy is cancelled or isn’t renewed.
- The terms of the coverage, including the retroactive date, mandatory certifications or proof of insurance requirements
- The policy limits and, if the policy is a group policy, whether the limits are shared among the group
- Who is responsible for paying for tail coverage if the group providing current insurance converts to a different coverage type, is acquired, or is dissolved
How to Read a Dec Page for Switching: What Fields Matter
A declarations page (dec page) is a one-page summary that helps you easily compare policies or understand the terms of your new insurance coverage. Virtually every dec page contains the same basic information and you must know what’s important to review. Here’s what to look for:
- The named insured and entity type: This should include the legal name and type of practice.
- Policy type: The declaration page will specify whether the policy type is claims-made or occurrence. This determines when your coverage is in effect.
- Policy period + effective date: This specifies when your policy goes into effect and when it ends so you can confirm there’s no gap between your old expiration date and your new policy’s effective date.
- Retroactive date / prior acts date: When you buy prior acts coverage, you must know the retroactive date or how far back your acts are covered.
- Claim limits: This is the maximum amount the insurer will pay per claim. Make sure it’s high enough, and determine if there are any sublimits for specific kinds of clinical work.
- Deductible or self-insured retention: This is the amount you must pay out of pocket before insurance begins covering any additional losses.
- Endorsements list: Endorsements add to the standard coverage. Check your policy carefully to make sure any expected add-on coverage is included. Most notably, you should confirm that your policy provides prior acts coverage or an extended reporting period.
- Reporting instructions: Your dec page should make clear where, when, and how to report a claim
Incidents, Demands, Potential Claims: Disclosure & Switching
You’ll encounter industry-specific language when you are researching or purchasing malpractice insurance. Here are some of the key words you must know to understand coverage and provide information your insurer requires.
- Incident or circumstance: This is a clinical event that you know or reasonably should know might give rise to a malpractice claim. It includes things like patient complaints or bad outcomes that you know, or reasonably should know, were the result of negligence, even if there’s been no claim filed yet.
- Demand: A demand comes from an aggrieved patient, or their attorney, representative, or estate. Both written and oral requests for compensation are considered demands. A formal legal process hasn’t yet been initiated when you’re sent a demand, but you still must report all demands to your insurer.
- Claim: A claim occurs when a patient initiates a formal legal process, such as by demanding arbitration or filing a lawsuit.
Insurers typically require you to report incidents, or “known concerns.”
If you report a known concern before you cancel malpractice coverage, your policy may have a lock-in clause or notice of circumstance that ensures you’ll be covered for that incident by your current policy if the patient eventually makes a claim, even if you’ve switched insurers before that happens.
You must disclose incidents or circumstances, demands, and claims whenever a current or potential insurer asks about your clinical work. Unfortunately, many doctors make mistakes in this process including:
- Assuming they don’t have to report incidents if no lawsuit has been filed yet
- Not reporting incidents to your carrier before cancelling
- Disclosing an incident or demand but not confirming in writing whether your new carrier will cover it before switching policies
- Omitting incidents that seem minor
These mistakes are easy to avoid, as long as you know that they could cost you coverage.
Ask-Your-Broker Script
To make sure you avoid a coverage gap and seamlessly switch carriers, ask these questions of your broker and get the answers in writing:
- What retroactive date is reflected in this quote and is it the same as my current retroactive date?
- Can you confirm the proposed retroactive date in writing within the quote documents?
- Will past gaps in coverage affect the retroactive date on the policy?
- Do I need tail coverage and what are my tail options if I cancel my current policy?
- How long do I have to buy tail coverage after cancelling and what is the cost?
- Is there free tail coverage provided for retirement or death?
- Does my current policy exclude prior acts?
- Are any specific procedures, locations or entities excluded from prior acts coverage?
- What are the individual and aggregate policy limits?
- Does the policy have a consent to settle clause?
- What happens if I refuse a recommended settlement?
- When do I have to report after I become aware of an incident?
- If I report a known circumstance before binding, will it be covered?
- What is the effective date of the new policy and how does it align with the cancellation date of my old coverage?
- What would delay binding?
- What documentation or information must I provide before binding?
- What will tail coverage cost in the future if I cancel this policy?
While you should ideally ask all of these questions, if you can only ask five, here are the most important questions to get answers to:
- What is the retroactive date of the coverage and is it the same as my current retroactive date?
- Are any prior procedures or incidents excluded from the coverage?
- What are the policy limits?
- What is the time deadline for reporting a claim?
- What is the cost of tail coverage if I eventually cancel this policy?
FAQ
Still need to know more? Here are the answers to some frequently asked questions.
What Should My Retroactive Date Be When I Switch?
When you switch malpractice insurers, your retroactive date on your new policy should match the retroactive date on your old policy, if there is one. This protects you for all past clinical work dating back to the time when you purchased claims-made coverage. If your retroactive date is not the same, you will need tail coverage in order to avoid a coverage gap.
Do I Need Tail Insurance If I’m Switching Carriers?
You need tail insurance when you switch malpractice carriers if you had a claims-made policy and your new insurer will not offer full prior acts coverage with the same retroactive date as your old policy.
What’s The Difference Between Tail And Prior Acts?
Tail coverage provides coverage for claims arising from clinical work while the old policy was in effect, even if the claim is made after your old policy is cancelled. Prior acts coverage provides coverage for claims made when the new policy is in effect, even if the incident giving rise to the claim happened when you had your old coverage.
Can I Cancel My Old Policy After The New One Starts?
You cannot cancel your old insurance policy until you confirm that your new policy is fully bound and that all coverage terms and endorsements are included in writing. Your new policy should go into effect immediately when your old policy is cancelled and you should confirm you have either tail coverage or prior acts coverage in place to avoid a coverage gap.
What If I Had An Incident But No Claim?
If you had an incident but no claim, you should report the known concern to your existing medical malpractice insurer before cancelling the policy. If you have a lock in clause or notice of circumstances provision, this locks in coverage under the current policy for the incident.
Who Pays Tail When Leaving A Group?
Your employment agreement determines who pays for tail coverage when leaving a group policy. Your employer may pay for coverage, or you may be obligated to pay, especially if you resigned voluntarily. Confirm you understand who is responsible for paying for tail coverage before signing any employment agreement.
Glossary
Here are some of the key terms to know when switching medical malpractice carriers.
- Retroactive date: Retroactive date or prior acts date is the earliest date that an incident can originate from and still be covered by your claims-made policy.
- Prior acts / nose coverage: Prior acts or nose coverage is insurance that covers claims arising from incidents that occurred while you were insured by your old carrier after you’ve cancelled a claims-made policy.
- Tail / ERP: Tail or ERP coverage is insurance you buy when you cancel a claims-made policy that ensures continued coverage for claims arising from clinical work you did while your old policy was in effect.
- Notice / reporting requirement: A notice or reporting requirement is a contractual obligation to report a claim, demand, or known circumstance to a medical malpractice insurer.
- Claim vs circumstance: A circumstance is an incident, such as a clinical event or situation, that could give rise to a medical malpractice claim. A claim is a formal legal process such as a lawsuit or arbitration demand that a patient makes.
Final Thoughts On Switching Medical Malpractice Insurance Carriers
When you switch malpractice carriers, you must avoid coverage gaps. By carefully researching tail coverage and prior acts coverage, you can protect against personal liability. And, by understanding the terms of coverage, including consent to settle requirements, whether there is a hammer clause, and the policy limits, you can put comprehensive protection in place.
Indigo’s medical malpractice insurance can help you get the right coverage in place for the state where you practice, given the laws affecting your risk.
Learn more about us today!
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