Business of Medicine
Understanding Claims-made vs. Occurrence Insurance Policies in South Carolina
By Clint Escoe, RVP South Carolina
August 22, 2018
The medical malpractice insurance market in South Carolina is changing. As insurers leave the market and new ones come in, it’s more important than ever before to fully understand your choices when it comes to medical professional liability insurance – to protect your patients, your practice and your reputation.
A key coverage concept all physicians need to understand is the difference between claims-made and occurrence insurance policies. For years, occurrence coverage was standard in South Carolina. Occurrence policies provide coverage for claims arising from events that occur during the policy period; regardless of when the claim is filed and even if a physician no longer has the policy or uses that insurance company. The occurrence of the event is the claims “trigger.”
With a claims-made policy, the claim “trigger” is when the claim is reported to the insurer. The policy in effect when the claim is first reported will respond even if the event occurred under a previous policy, as long as the event occurred after a specified retroactive date. This date is established when claims-made coverage is first elected and carried forward through subsequent renewals and/or carriers. This structure allows for the current policy, with recently negotiated terms and limits, to respond to claims as they’re reported. Claims-made policies dominate the medical professional liability market because of the flexibility they provided for physicians and providers.
The differences between claims-made and occurrence policies are important to understand. It is not uncommon for claims to be made up to two years, (or more, depending on the circumstances), after the medical event occurred and the average length of time it takes to litigate a medical malpractice claim can take anywhere from a few months to several years. This timeline could leave the policyholder of an occurrence policy relying on an insurer, limits and coverage from more than six years removed from the ultimate judgement or settlement of the claim.
In addition, occurrence policies are frequently more expensive for the policyholder. Claims can be reported years after the policy expires, making it difficult for insurers to estimate the frequency and the cost of claims. This uncertainty leads to more conservative pricing models and ultimately higher premium costs to policyholders.
However, the claims reporting trigger of an occurrence policy also presents an advantage over traditional claims-made insurance. Under an occurrence policy, if a claim arises from an event that occurred during the policy, then that policy will respond regardless of when the claim is reported. Under a claims-made policy, if a physician terminates coverage or moves coverage to another carrier, the new carrier needs to either accept claims for prior acts or the physician must purchase the right to report all future claims against their expiring policy (also known as an extended reporting endorsement or tail coverage).
To provide a solution for physicians transitioning from occurrence policies, MagMutual developed a new product that funds the cost of tail during the first few policy years. MagMutual now offers this “pre-paid tail” coverage exclusively for South Carolina physicians who switch from an occurrence policy to a MagMutual claims-made policy. This new coverage provides another option to South Carolina physicians to enjoy the benefits of being a MagMutual PolicyOwner℠.
The information provided in this resource does not constitute legal, medical or any other professional advice, nor does it establish a standard of care. This resource has been created as an aid to you in your practice. The ultimate decision on how to use the information provided rests solely with you, the PolicyOwner.