Our New York, New Jersey and Connecticut Physician Employment Agreement Attorneys provide advice and counsel to residents, fellows and experienced doctors regarding their employment contracts and partnership considerations. One of the most common questions our law firm receives concerns a significant consideration for every new medical position – the type of malpractice insurance offered. This blog post will discuss the general differences between the two types of malpractice coverage – claims made coverage and occurrence based coverage. In short, as discussed below, if a physician has an option between the two types of insurance, occurrence based coverage is more advantageous. Our employment lawyers have reviewed hundreds of medical professionals and can answer your specific questions. Contact our law office to protect your medical career and learn your rights in the workplace.
Limitations of Coverage
A Claims Made Policy will protect incidents arising on or after the policy’s stated retroactive date if they are reported during the term of the policy. If an incident is reported after the policy expires and no tail coverage is purchased (as discussed below), the claim may not be covered.
An Occurrence Based Policy will protect incidents arising during the coverage period – regardless of when those claims are reported to the carrier. As a result, there is an expanded scope and reduced exposure for doctors.
Prior Acts Coverage
A Claims Made Policy can be endorsed and expanded to respond to incidents which occurred before the policy start date. This is sometimes referred to as a policy retroactive date. Generally, this endorsement is an additional expense.
No Prior Acts coverage is needed for an occurrence based policy.
A Claims Made Policy does not protect incidents that have not been reported to the company during the policy term. If such protection is sought, tail coverage must be purchased. Tail coverage can be very expensive. Some policies are over $25,000.00. It is worth noting that some companies will offer a free tail at retirement, subject to certain conditions.
For Occurrence Based policies, tail coverage is not needed because incidents that occurred during the policy period are covered no matter how much later they are reported.
A Claims Made policy typically involves a graduated process with premium increases over the first five years of coverage in increments proportional to the claims reporting for that experience. The initial premium and subsequent years’ premium are substantially lower than an occurrence policy. By the fourth or fifth year the claims made premium reaches a mature level and premium adjustments are based on annual rate changes only.
Occurrence based policies generally are very expensive because the insured is prepaying for tail costs whether the tail gets used or not.
As you can see, there are significant differences between the types of professional liability insurance policies for physicians. It is very important for you to secure experienced legal counsel as soon as you receive your agreement so that your rights are protected. Call now to speak with one of our Employment Lawyers at (800) 893-9645 to learn your rights.
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