Written by Stephen Lim Lic #0M66738
There are many complexities to medical malpractice insurance and one of them is the different policy forms that are provided to healthcare professionals who are insured. Policy forms include the claims-made, occurrence, and claims-made convertible. Typically, most policies are an occurrence made policy. However, due to a large number of claims and inflation of premiums in history, the insurance market created a policy form to reduce the burden of risk but also reduce premiums, which is the claims-made policy form. There are some caveats to be aware of which will be laid out in this blog with a healthcare focus.
An occurrence made policy covers any claim that is reported during the active policy period and for any claim that may arise during the active policy period but is reported after the policy has expired. For example;
• You are with Insurance Company A from 1/1/2018 - 1/1/2020
• On 1/1/2021 you decide to change insurers to Insurance Company B.
• Sometime in 2021, a demand letter is presented to you with an intent to sue for alleged medical malpractice for a procedure that was performed during the above policy period.
• You would report this to the insurance company you had in place from 1/1/2018 - 1/1/2020, Insurance Company A.
A Claims-Made policy covers any claims that you may be aware of or through written demand during the policy period and only during the policy period. If the policy cancels, there is no longer coverage unless an extended reporting period is purchased, or a new policy maintains your retroactive date. The retroactive date is typically the date of the policy’s first inception date and can be maintained to cover prior acts with any new insurer. For example;
• You are with Insurance Company A from 1/1/2018 - 1/1/2019, with a retroactive date of 1/1/2018
• You switch to Insurance Company B from 1/1/2019 - 1/1/2020 and maintain a retroactive date of 1/1/2018
• On 1/1/2020, you decide to continue coverage with Insurance Company B
• Sometime in 2020, a claim arises for a procedure that was done in 2018. This claim would be reported to Insurance Company B, who maintained your retroactive date and took responsibility for the prior acts coverage. In an occurrence made policy, you would report this claim to Insurance Company A.
A claims-made convertible is a special program from CM&F Group for Advanced and Allied practitioners in a claims-made policy with the ability to convert into an occurrence made policy, and maintain prior acts coverage in a vested time period of five years.
An extended reporting period is primarily involved with claims-made policies and its intent is to cover prior acts once a policy is canceled. Extended reporting period endorsements or policies are often called Tail Coverage. Tail coverage can be purchased from the expiring policy provider or purchased as a stand-alone policy, but typically within a 30-day time frame from the date, the policy is canceled or expired. Here are some key points about tail coverage for healthcare professionals;
• Typically, 100% - 400% of the expiring premium is due to cover prior acts from the retroactive date to the date of policy cancellation or expiration.
• Coverage is offered in 1, 3, 5 years, and lifetime coverage
For example;
• From 1/1/2018 to 1/1/2019 you are with Insurance Company A with a retroactive date of 1/1/2018.
• From 1/1/2019 to 1/1/2020 you are with Insurance Company B maintaining a retroactive date of 1/1/2018
• On 1/1/2020 you decide to retire or discontinue your coverage, you now have 30 days to purchase an extended reporting period endorsement or policy to cover your prior acts
• With Tail Coverage purchased from Insurance Company B for a lifetime of prior acts coverage, this covers any claims that may arise from 1/1/2018 (your retroactive date) to 1/1/2020 (policy cancellation date) and would be reported to Insurance Company B.
Hiring the right broker is paramount in your successful understanding of the different forms of coverage in the commercial insurance marketplace. California Attending Physicians Insurance Agency can lay the foundation of understanding for you.
