How do I choose Malpractice Insurance?

If you are just starting practice as an employee with a physician group, you may think you don't need to know that much about malpractice insurance. Most likely, your insurance is paid for by the group, which has already chosen the carrier and negotiated the policy details.

So, what's to know? 

Tail coverage supplements a claims-made policy. It extends coverage for incidents that occurred while you had your policy but were not reported until after your policy expired or was cancelled. An extended reporting period is also known as tail coverage.

Directors and Officers (D&O) Liability Insurance — a type of liability insurance that protects directors and officers against claims made against them while serving on a board of directors or as an officer. D&O liability insurance can be written to protect the directors and officers of for-profit corporations, privately held companies, non-profit organisations, and educational institutions. The policies, in effect, serve as "management errors and omissions liability insurance," covering claims arising from managerial decisions that have negative financial consequences.

Nose coverage is a claim-made insurance feature that covers a mistake or oversight you made while insured under a previously terminated policy. It is also known as prior acts coverage, and it entails your new insurer extending its coverage to something you did in the past while insured by another carrier.

Tail insurance can be an expensive expense. In general, it is one and a half to two times your annual premium. Because each insurance carrier has its own "tail factors" based on its underwriting guidelines and actuarial rules, tail costs may vary by carrier.

Tail coverage is a one-time purchase, and payment is usually due shortly after your policy expires. Most tail quotes are only valid for 30-60 days, and once they expire, they cannot be reissued.

If your business insurance policy is written on a claims-made basis, tail coverage is included. It protects your company from claims that are reported after your insurance policy has expired. This is also referred to as an extended reporting period. Tail coverage can last a year or more if you get it. You can consult with your insurance agent or insurer to determine how long an extended reporting period is appropriate for your company.

The greater the length of your tail coverage, the longer your protection can last. Assume you fail to renew your professional liability policy after it expires in September 2020. Because your policy was not renewed, you add three years of tail coverage. In October 2021, your client sues your company for an incident that occurred during the policy period. Because the claim is reported during the tail coverage, the insurer can assist.

Clients rely on accountants for financial advice and the filing of important documents such as tax returns. Assume an accountant fails to use all financial documents when preparing a client's tax return. The client later learns from the IRS that they owe back taxes as well as a penalty for the error. They file a lawsuit against the accounting firm for monetary damages. If the firm no longer has accountant insurance but still has tail coverage, the insurance company may be able to assist in covering this claim.

In some cases, a physician may be required to work for an employer for at least five years to qualify for free tail coverage. Alternatively, if the physician is terminated without cause, the employer will agree to pick up the tail, whereas physicians who leave with the cause must pay for it themselves.

The Watchtower Dubai is an experienced insurance company with specialists who can answer any coverage questions you may have. You can also work with a local insurance agent to ensure that your small business is adequately protected. We're here to help if you have any questions about purchasing tail coverage or how it can benefit your business.