Claims Made Versus Occurrence, in Plain Language

An occurrence policy covers incidents that happen during the policy period, no matter when the claim is reported. If you treated a patient in 2021 and the suit arrives in 2027, the 2021 policy responds. Once you have paid for an occurrence year, that year stays covered permanently. A claims made policy covers claims that are first made against you during the policy period, provided the incident happened after a stated retroactive date. The policy that matters is the one in force when the claim is reported, not the one in force when the care was delivered. That means coverage follows the current policy, and it means that when the current policy ends and is not replaced, the protection for all of those past years ends with it. Occurrence coverage is cleaner. Claims made coverage is far more common in medical professional liability, and it is usually less expensive in the early years. The trade is that a claims made program has to be maintained continuously, and ending it requires a deliberate step.

• Occurrence: the policy in force when care was delivered responds, whenever the claim arrives
• Claims made: the policy in force when the claim is reported responds, if the incident postdates the retroactive date
• Claims made premiums usually step up over several years until they reach a mature rate
• A claims made program creates a liability at the end of the relationship that has to be addressed

The Retroactive Date Is the Whole Ballgame

The retroactive date, often called the prior acts date or retro date, is the earliest date of care the policy will respond to. A policy with a retro date matching the physician's first day of practice covers everything. A policy with a retro date of today covers nothing that happened yesterday. This is where carrier changes go wrong. When a practice moves its malpractice coverage to a new insurer, the new policy should carry over the original retroactive date so prior acts stay covered. If the new carrier issues the policy with a retro date equal to the new inception date, every patient encounter before that date just became uninsured, and nobody may notice until a claim arrives two years later. Check the retroactive date on the declarations page at every renewal and every carrier change. It is one line of text, it is easy to verify, and it is the single most common point of failure in a claims made program.

• Confirm the retro date on the declarations page at every renewal, not just at placement
• On a carrier change, the new policy should match the original retro date, not the new inception date
• A retro date can differ by physician within the same group policy, so review each one
• Gaps in coverage can permanently cut off prior acts, and they are rarely repairable later

Tail Coverage, or the Extended Reporting Period

When a claims made policy ends and is not replaced by another claims made policy carrying the same retro date, the practice or the physician needs an extended reporting period, commonly called a tail. A tail does not cover new care. It extends the window in which a claim arising from past care can be reported. Tails are usually offered for a defined period, such as one, three, or five years, or on an unlimited basis. Pricing is typically expressed as a percentage of the mature annual premium, and it is often substantial. Many policies include a free tail under specified conditions, most commonly death, disability, or retirement after a stated number of years with the carrier and after reaching a stated age. Those conditions are specific and worth reading long before anyone retires. The practical question is who pays. In a group setting, the employment agreement should say. Some agreements require the departing physician to buy the tail. Some require the practice to buy it. Some are silent, which is how disputes start. The time to settle this is when the employment agreement is drafted, not during a resignation conversation.

• A tail extends the reporting window for past care; it does not cover new care
• Free tail provisions usually require specified conditions such as death, disability, or qualifying retirement
• Tail pricing is often a multiple of the annual premium, so it belongs in succession planning
• Employment agreements should state explicitly who purchases the tail on departure

The Alternative to a Tail: Prior Acts on the Next Policy

There is another way to solve the same problem. Instead of buying a tail from the departing carrier, the physician's next policy can be written with a retroactive date reaching back to cover the prior acts. A physician joining a hospital or a new group can often have prior acts picked up by the new carrier, which eliminates the need for a tail from the old one. Both routes work. Only one of them should be used, and the practice and the physician need to confirm which, in writing, before the old policy lapses. The failure mode is assuming the other party handled it. A physician who assumes the new employer picked up prior acts, and an employer who assumed the physician bought a tail, leave several years of patient care uninsured between them.

Entity Coverage, Corporate Liability, and the Group's Own Exposure

There is a second layer practices overlook. Claims frequently name the practice entity as well as the individual clinician, on theories such as vicarious liability, negligent credentialing, or corporate negligence. If the policy covers only named physicians and does not include separate entity coverage, the practice may be defending itself without a limit of its own. Ask three questions. Is the corporate entity a named insured. Does the entity share the physicians' limits or have its own. And are non physician clinicians, employed advanced practice providers, and the staff who touch patients covered, and how. Many disputes about coverage after a departure turn out to be disputes about who was ever an insured in the first place.

• Confirm whether the practice entity is a named insured with its own limit or shares physician limits
• Check that advanced practice providers and employed clinical staff are covered, and on what basis
• Understand how the policy treats locum tenens and contracted physicians working in your space
• Review consent to settle provisions, because many malpractice policies give the physician a say the entity does not have

Have Your Malpractice Program Reviewed

If you are onboarding a physician, planning a retirement, or changing carriers, the retroactive date and the tail provision deserve a careful read before anything is signed. We work with physician groups, specialty practices, and clinics on professional liability placements and can review your declarations pages and employment agreements together. Schedule a time at calendly.com/grandbayfinancial. This article is for general information and is not a substitute for policy language or professional advice.