If I must buy tail insurance: what are my options?
Tail coverage (or tail insurance) is a general concept that is utilized to extend the claims made reporting time on claims made policy forms of medical professional liability policies. Claims made policies cover "claims that are made (reported) during the policy period that have occurred at any time since the retroactive date listed on the policy." While this is somewhat confusing, it became necessary in the mid-1970s for physicians medical professional liability insurance to more accurately predict the cost of the insurance.
When the insurer of the physician provides tail coverage it is done by endorsement to the policy by adding and Extended Reporting Endorsement to the policy thereby accomplishing an extension of time to report claims that have already occurred, but not yet reported. In the case of death, disability, or retirement (subject to certain conditions generally related to age and years of continuous coverage at the time of retirement) no additional charge is made for the tail coverage. But when physicians move to new locations, change carriers, retire (and do not meet the requirements for free tail) a charge for tail coverage is made.
WV Statutory Requirements
West Virginia statute requires specific terms and conditions for tail coverage offered by WV licensed insurance companies. WV statute requires that periodic payment options be offered to physicians. The coverage when offered is offered at the following payment options: lump sum; quarterly installments over one, two, or three years. These options (the annual installments) are unique to WV--in most all states, the only option is lump-sum payment. Further, should a purchaser not pay the full premium, the percentage of premium paid will be applied to the limit of liability to determine the actual limit available to the insured in event a claim is reported in the future. These features are deemed beneficial to purchasers of tail coverage.
Stand-Alone Tail Policies
Since the mid-1970s, claims made coverage has become more extensively utilized and in recent years, insurance companies that have NOT been the provider of the physician's insurance have offered to provide only the tail insurance. This is called standalone tail and is written on a separate (new) policy.
The up sides to purchasing tail coverage on a stand-alone basis are:
* Frequently lower tail costs are available and from quality rated carriers.
* Shorter tail coverage periods can be purchased in the free standing tail market. While this may not be the recommended way of handling tail purchases; it does allow physicians to opt for lower premiums for a reduced term of tail coverage.
* Should the physician purchasing tail leave a group, the options of purchasing tail may be controlled by the group; the availability of stand-alone tail gives the physician an option which he/she controls.
* Cessation of a group (primarily for financial reasons) may create a situation where tail coverage for the group is not available or there is no source for payment. The availability of free-standing tail gives individual physicians a way to protect their individual exposures.
Make the Right Choice
NOT all options of purchasing stand-alone tail are beneficial to physicians. For example, the definition of claim may be different on the stand-alone tail policy from the regular policy--determination of the effect of this difference must be understood.
While options do exist when purchasing tail, a physician should be alert to the options available, and know that reduced prices are available, but favorable factors in WV statute and the problems created by changing carriers (with different definitions for a claim) can also create a long-term problem for the physician.
We recommend the physician wanting to review options make sure they are alert to the various concerns and understand the issues before making their decision. We, the West Virginia Medical Insurance Agency, can help you evaluate your options and answer your questions. Call Steve Brown, Agency Manager, for more details about your tail purchase options.
West Virginia Medical
Office: 304-925-0342, ext. 22-Steve; ext. 17 Robin Steve's Cell: 304-542-0257 | Fax:304-925-3166
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|Title Annotation:||WV Medical Insurance Agency: NEWS|
|Publication:||West Virginia Medical Journal|
|Date:||May 1, 2016|
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