To answer that question, you must understand the disparities between the primary forms of professional liability coverage – claims-made policies and occurrence policies.
A claims-made policy covers events that occur during the policy period AND are reported while the policy is still in force. A claims-made policy allows physicians to change insurance companies (for the purpose of lowering the premium, increasing limits or other benefits) as long as the original retroactive date is not changed.
When changing insurance companies, one of the most important dates on a policy is the retroactive date. When a policy is originally bound, a retroactive date will be established. This date will remain unchanged as the policy renews year after year. By maintaining the same retroactive date, a physician can transfer coverage to another insurance without the need to purchase “Tail” from the previous carrier.
The “tail” (extended reporting period endorsement) only applies to claims-made policies. Since a claims-made policy only covers a physician if the incident happens and is reported to the carrier while the policy is active, a “tail” would need to be purchased to allow the physician to report a claim once coverage is no longer active. This only applies when coverage is no longer needed and the policy is canceled.
Many standard insurance companies offer free “tail” coverage if certain criteria are met. For example, physicians can receive free coverage at retirement if they are 55 years of age, have 5 years of consecutive coverage at the same company (some carriers require less years), and they are completely retiring from the practice of medicine.
An occurrence policy covers events that occur during the policy period regardless of when they are reported to the insurance company. Occurrence policies cover a physician indefinitely for services rendered during a 12-month time period. These policies are uncommon and are typically overpriced or simply not available in many states. However, in Florida, The FMM JUA offers occurrence policies that are cost effective if the physician is working limited hours and cannot obtain coverage from a standard insurance carrier.
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