As with many kinds of lawsuits, insurance coverage plays a big part in a medical malpractice case. But what happens if a plaintiff brings a lawsuit after a health care provider's malpractice insurance policy has lapsed? In these cases, it's important to know whether the provider has purchased additional insurance for claims made after the policy expired. This is often called “tail coverage,” and in this article, we'll explain how it works.
To understand what tail coverage is, you must first understand what standard claims-made insurance policies cover when it comes to an alleged medical error that forms the basis for a medical malpractice lawsuit.
A claims-made policy protects the health care professional or facility from claims based on an incident that occurred and was reported while the policy was in effect.
In contrast to a standard policy, tail coverage provides protection for medical malpractice claims that are reported after the provider's policy expired or was cancelled.
Here is an example of how tail coverage works:
Doctor A’s insurance policy is in effect from January 1, 2010 through December 31, 2020.
Patient B alleges that Doctor A committed malpractice on September 1, 2020, but Patient A does not bring a malpractice lawsuit until May 1, 2021. The case is filed in time according to the medical malpractice statute of limitations, but by this point, Doctor A’s insurance policy has been cancelled. Doctor A’s new insurance does not cover prior acts. Unless Doctor A has purchased tail coverage, Doctor A will not be insured for this claim.
This issue is crucial not just for Doctor A (who may not be covered and may therefore be personally liable), it's also critical to Patient B's lawsuit. That's because even if Patient B's lawsuit is successful and he or she receives a significant medical malpractice damages award from the court, collecting a judgment against an individual doctor is going to be a lot harder than collecting from an insurance company.
A few important points regarding tail coverage: First, it only protects health care providers for acts that were committed during the original policy period, so it will not provide protection for claims for acts made during the period of tail coverage. Second, it may have a different limit of liability than the aggregate claims-made policy had.
Tail coverage requires that the policy holder pay an additional premium. Most claims-made policies must give the doctor the option to buy tail coverage to cover claims if and when the policy is cancelled. The issue, however, is that the additional premium coverage can be extremely expensive—sometimes 150 or even 200 percent of the price of a mature claims-made policy, depending on the medical specialty and the location.
Sometimes this cost can be spread out over several payments. It can often be written off as an unreimbursed business expense for tax purposes as well. The best case-scenario is that the doctor joins a group that agrees to cover (or split) the cost of tail coverage.
Some insurance companies offer options to doctors such as an "extended reporting" endorsement that is less expensive than purchasing standard tail coverage.
Another option is to purchase lower limits of liability or limited term tail coverage as opposed to the standard unlimited term. However, it is important to make sure that these options satisfy any requirements of the hospital or group practice the doctor is joining.
Another option in lieu of tail coverage is "nose coverage." Nose coverage is coverage for prior acts. It is offered by the doctor’s new or subsequent insurance policy to cover acts that occurred before the new policy took effect. It is basically the opposite of tail insurance, but effectively provides the same kind of coverage.
Again, the best-case scenario would be that the doctor’s new group or practice pays for nose coverage. However, you should note that it’s not necessarily offered to all doctors. For example, some insurance companies will not offer nose coverage to doctors who have had numerous claims filed against them, or who practice in a highly litigious area. Sometimes nose coverage is not offered to doctors who came from a group practice, since the doctor’s liability for prior acts could be tied into the group’s liability, and complications can arise by roping in two different insurance companies (and two different law firms) into one defense.
Learn more about how medical malpractice insurance coverage works.