What is Tail Coverage?
To understand tail coverage, you must first understand how a claims-made insurance policy works. A claims-made policy responds to claims based on when the claim is made against an insured, regardless of when the incident the claim is regarding occurred. This is important because if there is a claim submitted after a claims-made policy is no longer in effect, it will not be covered even if the incident the claim is based upon happened during the policy period. This differs from an occurrence policy (claims-made vs occurrence), where claims are covered based on the date the incident occurred. Tail coverage is not needed for occurrence-based policies.
Complicating matters, most malpractice claims are made months or even years after the incident occurs. This is where tail coverage comes in. When purchasing a claims-made insurance policy, medical professionals have the option to purchase an extended reporting period endorsement. An extended reporting period endorsement or tail coverage covers the owner of the policy for claims made during the policy term, but after the policy has cancelled or terminated.
Who Needs Tail Coverage?
Because most malpractice claims are made months after the incident occurs, tail coverage is necessary for medical professionals who are:
Switching to an occurrence policy.
Leaving a solo or group practice.
Starting a solo practice.
In all these situations it might be necessary to terminate a previous policy and switch to a new one. Tail coverage ensures that physicians are covered for the period of their previous policies which otherwise would be at risk in times of transition such as retirement or switching coverage or any other situation where a claims-made policy is terminated.