Tail Insurance Protects Against Medical Malpractice Claims from Previous Jobs

Steven M. Harris, Esq.

Is your medical malpractice insurance provided by your employer? Are you switching jobs? Are you looking for a new job? Are you in the market to purchase a malpractice insurance policy? Are you planning to retire soon? If you answered “yes” to any of these questions, you likely need to consider whether “tail” insurance (also known as a reporting endorsement) is in your near future.

Now is the time to dust off your employment agreement and malpractice insurance policy and review what happens in the event a medical malpractice claim is brought against you after you leave your current employer. This means paying special attention to whether your malpractice insurance policy provides for claims-made or occurrence-based coverage, and, if it’s the former, who is responsible for purchasing tail coverage.

When Do I Need Tail Coverage?

Whether you are resigning, retiring, or have been terminated, tail insurance should be a key consideration. If you are leaving a place of employment (regardless of your reason for leaving) that has claims-made professional liability insurance, your insurance coverage may not be seamless to your next job. Instead, tail or similar coverage is required. Claims-made coverage protects against professional negligence as long as a two-part test is met: first, you must have the claims-made coverage in place when the negligent act occurs (with Employer #1) and, second, you must be covered by the same carrier when you are notified of the claim while employed by Employer #2. If either prong is not satisfied, the current claims-made insurance policy will not provide you with coverage in the event a lawsuit is filed for an act of negligence that took place while you were employed by Employer #1. The majority of malpractice insurance policies written for medical practices are for claims-made coverage.

If, however, you leave a place of employment with occurrence-based professional liability insurance, your insurance coverage is seamless and no tail insurance is required.

Here is a common example of what happens when a physician leaves a place of employment with claims-made professional liability insurance coverage: A practice maintains claims-made professional liability insurance coverage for its physicians with ABC Insurance Co. A physician decides to leave the practice and is now employed by a new practice, which maintains claims-made coverage with XYZ Insurance Co. While employed by the new employer, the physician receives notice that a medical malpractice lawsuit has been filed for a procedure the physician performed while employed by the former practice. By leaving the former practice, the departing physician automatically fails the two-part test for claims-made coverage, since the second prong described above is not satisfied. Therefore, even though the physician has liability coverage through the new employer, that insurance policy will not cover the lawsuit. There is a gap in liability coverage, unless the physician has tail insurance to cover lawsuits related to the former employment.