Currently Ob-Gyn’s are contemplating a change in the direction of their professional practice since many are confronted with need to purchase an extended reporting endorsement aka tail for their professional liability coverage.
The two most common types of liability insurance policies for an Ob-Gyn are claims-made and occurrence policies. Claims-made policies cover only event and claims that happen and are reported while the policy is in effect. All coverage ceases on the date the policy is terminated.
An Occurrence policy covers events that happen during the period the policy was in effect regardless of when a claim is filed. Even if you no longer are covered by the insure. This type of coverage is desired by ob-gyns as a claims for an impaired infant may not be made until years after the event happens.
Claims made policies are leading among Ob-Gyn doctors. With a claims-made policy, you cannot simply leave your current carrier to start over with a new one. The liability exposures for incidents that happen before the beginning of the new insurance relationship, have yet to result in claim must be address before moving forward.
Here are some scenarios to consider:
- A physician leaves a group or closes a private to become employed by another group or hospital.
- A group practice merges with another group, or the whole group is acquired by a hospital.
- A group practice is contractually obligated to purchase tail coverage for a departing physician.
- A new physician is being recruited, and the analysis of his/her employment includes whether to “tail out” prior-acts of the physician or to provide coverage for the prior acts.
Although some carriers offer free tail coverage if a physician has been covered by a claims-made policy for specific number of years, when physicians are completely retiring from the practice of medicine, per the examples above, moving from independent practice retirement is not the predominant scenario we see today. Most carriers will charge 200 percent or more of the previous year’s premium for tail coverage. This is a one-time, due-upon-demand payment.
For physicians, unless the hospital or new group that is emplying you is willing to cover this cost, you’re stuck with it. In some cases, when a practice is selling its assets to a hospital or health-care system, the cost of the tail can effectively wipe out any of the proceeds of the sale.
Due to existing liability climate in the state in which the physician practices physicians have been faced with tails ranging from $50,000 to over $150,000.
In the event that you are moving to a new employer, whether it’s a new practice or hospital, you should first check to see if they will be providing prior-acts or “nose” coverage. This allows you to transfer your existing policy commencement date to your new insurance carrier, eliminating the need to purchase tail coverage from your last carrier. So then you purchase a first year claims-made policy from the new company.
Sometimes hospitals that employ physicians who are already in the community will take on the cost of the nose coverage making the net out-of-pocket to the physician is non existent.
Alternatively, there’s a new insurance product on the market known as Stand-Alone Tail coverage that is an extended-reporting endorsement policy purchased from a different liability insurance carrier than has previously covered the Ob-Gyn. This only covers claims made against an insured physician during the years after his or her traditional, original claims-made policy has expired. Until recently, physicians had very few options other than to purchase a tail or extended reporting endorsement policy from their existing carrier. Now, there are some carriers offering prices for stand-alone tails that are lower than the cost of tail coverage from existing carrier. The stand-alone policies can reduce the tail premium anywhere from 10-50 percent. Premiums are based on the time frame for the coverage — anywhere from one year to unlimited – and on other underwriting criteria. These policies can also be used in circumstances where an Obstetrics – Gynecology practice is being sold or shut down and may have ongoing exposure to prior liabilities, but no free tail available.
If you are considering tail, we’re more than glad to help you get the coverage you need. Feel free to give us a call us directly at (805) 499-7300 or email us at info@presidioinsurance.com for more information.