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Malpractice Insurance

A generic term used to refer to physicians’ professional liability insurance coverage. A malpractice policy provides protection against liability that a physician may incur as a result of the rendering of—or the failure to render—medical services. A typical malpractice policy will pay: (1) the costs of investigating any claims against an insured physician; (2) the costs of defending those claims; and (3) the indemnity cost of any legal settlement on behalf of—or court judgment against—the insured physician, up to the policy limits.

A physician’s professional liability policy may be extended to include coverage for his or her corporation (P.C.), as well as employees. Unless specifically endorsed, coverage is not extended to include physician assistants, nurse practitioners, nurse midwives, or CRNAs, and may not provide coverage for residents or locum tenens physicians. Most policies are written on either a claims-made or occurrence basis.

Occurrence

Occurrence malpractice policies cover a physician for incidents that occur while the policy is in effect, regardless of when the incident is reported to the insurer.

Claims-made

Claims-made policies cover a physician for incidents that occur after the retroactive date and are reported to the insurer while the policy is in force.

Retroactive

For coverage under a claims-made policy to apply, the incident or claim must have occurred after the retroactive date of the policy. For most physicians, this retroactive date is the first date they purchased claims-made professional liability coverage. The retroactive date should remain the same as the policy is renewed.

Tail

A tail is also known as an extended reporting period (ERP). An ERP may need to be purchased if a physician ceases to practice due to retirement, disability, or death, or changes carriers and is unable to maintain their original retroactive date. The ERP essentially extends coverage to all claims that arise from care rendered during the policy period (and prior acts period, if applicable), to include those made during the reporting period. It is preferable to purchase an unlimited ERP. Some carriers may limit the ERP and only allow claims to be reported for a specific period (12 months, 36 months, etc.). The carrier will usually charge an additional premium for the ERP. In some cases, the carrier will provide a free tail to the physician upon disability, death, or retirement. To obtain the free tail, the physician generally needs to be insured by the same carrier for a minimum of five years.

Prior Acts Period

Under a claims-made policy, the prior acts period, also known as “nose” coverage, is the period of time between a physician’s retroactive date and the current policy period. If there is prior occurrence coverage, or this is the first claims-made policy that is being purchased, then there should be no nose exposure.

Umbrella Policy

In addition to a physician’s primary malpractice policy, some doctors also purchase umbrella policies. The limits for an umbrella policy apply on top (in excess) of the physician’s primary malpractice policy. For example, a primary policy may provide the physician with a limit of $1 million per claim. The umbrella policy may provide an additional limit of $2 million. If a $2.5 million claim occurs, the $1 million policy will pay its full limit of $1 million, and the umbrella policy will pay the remaining $1.5 million of the claim. Some umbrella policies have the same terms, conditions, and exclusions as the underlying primary policy. Other umbrella policies have their own separate terms, conditions, and exclusions.

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