What Is Tail Insurance?

Tail insurance, also known as an extended reporting endorsement, helps protect physicians from medical malpractice claims that are reported after their claims-made policy expires.  It is particularly important if the physician retires from the practice of medicine for any reason or if they leave one practice to join another and any new insurance with the new employer does not pick up prior acts coverage.

Claims-made policies are a type of medical malpractice insurance that offer coverage if the policy was in effect both when the alleged incident occurred and when the lawsuit was filed.

How Does Tail Insurance Work?

Tail coverage extends the reporting period for a claims-made medical malpractice policy. It allows physicians to report medical malpractice claims related to incidents that occurred when the policy was active, even if the policy has since expired or been canceled.

For example, imagine a physician who lets their claims-made medical malpractice policy expire when they transition to a new career. Some time later, one of the physician’s former patients files a medical malpractice claim. If the physician has active tail insurance, they still have liability coverage, even though the original policy has expired.

Who Needs Tail Insurance?

Many physicians with claims-made medical malpractice policies may find they need the extended protection offered by tail insurance. That includes physicians who are switching jobs, changing to a new medical malpractice insurer, or leaving medicine for one reason or another.

Physicians with occurrence policies don’t need tail coverage. That’s because occurrence policies offer coverage for alleged incidents that occurred when the policy was active, regardless of when the claim is reported.

Key Features of Tail Insurance 

The specifics of medical malpractice tail coverage may vary from insurer to insurer. When comparing coverage, physicians should note the cost and duration of coverage, as well as the types of claims covered.

1. Duration of Coverage

Tail insurance generally lasts for one year or more after the expiration of the original medical malpractice policy. When choosing a length of  tail coverage, physicians should consider the statute of limitations in their state. This is the legal deadline for patients to file a lawsuit for alleged malpractice.

2. Cost of Tail Insurance Policy 

The cost of tail malpractice insurance varies depending on many factors, including the number of years covered. On average, buying a tail costs about 2.5 times the amount of a physician’s yearly medical malpractice premium. For example, a physician who pays $10,000 a year for their medical malpractice coverage could expect to pay around $25,000 for tail insurance.

3. Types of Claims Covered 

Tail insurance offers coverage for alleged malpractice incidents that occurred before the original policy expires , but any claim is not made until after the policy expires.


Tail Insurance vs. Other Policies

Tail insurance is not the only coverage option for physicians. Here’s an overview of how tail insurance compares to other medical malpractice options.

Regular Malpractice Insurance

Tail insurance and regular medical malpractice insurance serve different purposes. With tail insurance, medical professionals can extend the reporting period for their old medical malpractice policy so that claims made after the policy expires are covered. That might be helpful for physicians who are changing jobs or retiring.

Regular malpractice insurance, on the other hand, offers ongoing coverage for claims of medical negligence made during the policy period.

Prior Acts (Nose) Coverage

Tail insurance and nose coverage are two options for filling gaps in medical malpractice coverage. Tail insurance works by extending the reporting period for an old medical malpractice policy.

Nose coverage, otherwise known as prior acts coverage, extends coverage in the opposite direction: With nose coverage, a physician’s new medical malpractice policy has a retroactive date earlier than the date the policy took effect.  That means, the alleged malpractice event giving rise to a claim must have occurred after the retroactive date, rather than after the policy effective date. Retroactive dates are often many years before the effective date of the policy.

Pros & Cons of Tail Insurance 

As with any type of insurance, there are both benefits and drawbacks of tail malpractice insurance.

Pros

  • Avoid a gap in malpractice coverage: Tail coverage shields physicians from claims that arise after their policy expires.
  • Enable career transitions: Tail coverage malpractice insurance makes it easier for physicians to switch jobs or switch careers, rather than being tied to one employer.
  • Maintain a professional reputation: Tail insurance can be crucial in defending against unfounded allegations that could cast doubt on a physician’s competence.


Cons

  • Tied to the original malpractice policy: The policy limits and coverage terms for the tail malpractice insurance are generally the same as the expiring policy.
  • Limited window to purchase coverage: Tail insurance must be purchased within a certain number of days of the policy’s expiration.
  • May be cost prohibitive: Often, tail insurance premiums are due in one lump sum upfront, though some insurers offer payment plans.


In the event of a change of employment, the physician will need to determine whether any new coverage provides nose coverage back to any prior retroactive date. If it does, then there is no need to buy tail coverage for the expiring policy. If any new policy does not provide nose coverage then it becomes vital to consider purchasing tail coverage under the old policy to avoid any gap in coverage. Again, tail and nose coverages only apply to a claims made policy. They do not apply to an occurrence policy.


Examples of Tail Insurance Claims

Consider this fictional scenario: Dr. Smith, a dermatologist who works in private practice, plans to let his claims-made policy lapse when he retires. In his last weeks in practice, he sees a patient who is concerned about a mole. After a careful examination, Dr. Smith reassures his patient the mole is normal.

One year into his retirement, Dr. Smith is sued by his former patient, who now has stage 4 melanoma. Fortunately, Dr. Smith purchased tail insurance when he retired, and his insurer mounted a legal defense against the missed diagnosis malpractice claim. The insurer’s lawyers successfully argue that Dr. Smith acted reasonably and competently, and the case is dismissed.


Tail Insurance With Indigo

Tail insurance offers crucial protection for physicians who would otherwise have a gap in medical malpractice coverage after their policy expires or is canceled. To support physicians who practice good medicine, Indigo offers free tail coverage for Death, Disability, and Retirement, subject to the policy’s full terms.

Request your quote for medical malpractice insurance today.

Disclaimer: This article is provided for informational purposes only. This article is not intended to provide, and should not be relied on for, legal advice. Consult your legal counsel for advice with respect to any particular legal matter referenced in this article and otherwise.