Tail Coverage: What Is It and Who Needs It?

Executive Summary 

Tail coverage may be necessary when you’re retiring from the practice of medicine or changing jobs to ensure that you’re still insured against a medical malpractice lawsuit that arises once you’ve either retired or changed positions. Since most medical professional liability insurances do not cover these types of medical malpractice lawsuits, tail coverage may be a needed protection.  

Recommended Actions 

• Determine whether your medical professional liability insurance is a claims-made policy. If so, you may need to obtain tail coverage. 
• Review your medical professional liability insurance policy to determine whether it includes free tail coverage. 
• Contact your insurance agent to determine the cost of obtaining tail coverage.  

Whether you’re retiring from the practice of medicine or changing jobs, you won’t be leaving your risk of a medical malpractice lawsuit from your old position behind. A patient can sue you months or even years after you’ve stopped treating them. That’s where an extended reporting endorsement, or tail coverage, can protect you. 

Insurers offer medical professional liability (MPL) insurance in two forms: 

• Claims-made, which covers only those events that are reported while the policy is in effect and occur on or after the retroactive date on your policy 
• Occurrence-based, which covers any event that occurred while the policy was in effect, regardless of when it is reported. 

If your policy is claims-made — and the vast majority of MPL policies are — and you are retiring or changing jobs, you probably need tail coverage. Here’s why: 

Let’s say a physician had a claims-made policy in effect from January 1, 1997, until December 31, 2020. The physician retires from the practice of medicine and cancels their coverage. In July of 2021, a former patient sues the doctor based on care received in October 2020. Because the claim is made after the policy expired, it would not be covered. Without tail coverage, the physician would have to pay all their legal expenses and any indemnity payments or settlements out of pocket. 

Unfortunately, tail coverage for physicians can be quite expensive, which is why some physicians choose to forgo it. Of course, lawsuits are even more costly, so going without tail coverage is a big financial risk. The good news is that some MPL policies include free tail coverage to retiring physicians who have reached a certain age and have held a policy with them for a specific amount of time. Check the language in your policy or contact your insurance agent to see if yours does. 

If you are changing jobs or insurance providers but not retiring, you will need to either carry forward your current retroactive date and purchase prior acts coverage, or purchase an extended reporting endorsement. Both will provide the protection you need, but prior acts coverage, if available, is typically less expensive. 

When purchasing a new MPL policy, it’s always a good idea to ask your agent if and under what circumstances tail coverage is provided. If it’s not included, find out the cost so you can be prepared for the expense if you retire or move to a new position. 

Definitions 

An extended reporting endorsement – often called an ERE or tail coverage– is an endorsement to your policy that provides a period of time to make or report a claim after a policy expires or is cancelled. 

A retroactive date is the date from which you have held uninterrupted professional indemnity insurance (even if you changed insurers during this time) or a date in the past from which your insurer has agreed to cover you. Any claims that arise from events before this date are not covered by your insurance. 

Lessons Learned  

• Contact a few insurance companies before committing to a policy to determine the best tail coverage available. 
• Before signing a new medical professional liability insurance policy, ask the agent if and when tail coverage is provided. 
• Purchase tail coverage that will last as long as the statute of limitations lasts for a medical malpractice claim in your state. 

Potential Damages 

Without tail coverage, a physician would have to pay out of pocket for all their legal expenses and any indemnity payments or settlements. Lawsuits are costly, so these expenses would add up quickly.