Written by Sarah Lim, CA Lic# 0M52397

KEY MEDICAL MALPRACTICE TERMS ALL DOCTORS SHOULD KNOW

Medical professional liability insurance is one of the most costly expenses doctors will have during their careers.  However, most doctors do not know what to look for in a medical malpractice insurance policy.  Not only is it time-consuming, but having inadequate or the wrong type of coverage, or going with the wrong carrier could end up becoming extremely expensive. 

By taking the time to fully understand the process of buying malpractice insurance, you, the doctor, can not only save money, but will also have the peace of mind knowing that there is the right coverage in place when you need it. 

The following are some basic explanations of important terms in medical malpractice policies:

Annual Aggregate Limit (claims made)

·      The maximum amount an insurance company will pay for ALL claims arising out of incidents that occurred and were reported during a given policy period.

Annual Aggregate Limit (occurrence)

·      The maximum amount an insurance company will pay for ALL claims arising out of incidents that occurred during a given policy period.

Claims Made Coverage

·      This provides coverage for claims that occur and are reported during the coverage period, while the coverage is still in effect.  The policy in force today, or when the claim is made, will respond to the claim.  This is the most common type of professional liability coverage.  

Limit

·      The MAXIMUM amount a policy will pay.  There are usually 2 limits:  per claim limit and annual aggregate limit. 

Mature Premium

·      This premium is calculated based on using a step rating system.  This system calculates an additional premium based on how many years of consistent exposure protection have been in place.  Therefore, a first year premium would be substantially lower than a mature premium which would usually be set at the 5 to 7-year mark.   

Nose Coverage

·      This is also known as retroactive coverage or prior acts coverage.  Nose coverage will cover a claim that comes in any time after the retroactive date, which can be different from the date that the policy went into effect, especially if there was a change in insurance companies. 

Occurrence Insurance

·      A type of policy where the policy that was in force on the date of the event or when the event happened, will respond to the claim.  This kind of policy is very rarely offered today due to the difficulty in projecting long-term claims costs. 

Tail Coverage

·      This coverage is purchased from the insured’s most recent insurance company that he or she cancelled coverage with.  Tail coverage extends coverage for a certain time period (1, 3, 5-years, unlimited) for all possible claims arising from the retroactive date to the cancellation date.  This type of coverage is very expensive and is generally 125% to 250% of the expiring premium (the prior year’s premium).