A medical professional may receive liability insurance coverage from their employer, which may be a hospital or private practice. Employer coverage is a claims-made liability policy which covers claims brought against an employee-healthcare provider. This benefit may be offered by employers seeking to lure more and better candidates to a position at their hospital or practice. When a medical professional receives coverage through their employer and does not individually purchase coverage, new problems arise as a result of this arrangement. When changing employers or retiring, physician-employees are often advised to “dust off” their employment contracts and the liability insurance policies which cover them. It is essential that a medical employee be well acquainted with the provisions of their coverage, especially so if they are about to make a career move - such as changing employers. Knowing they have employee coverage might breed a degree of complacency and a false sense of security, even more so if the physician-employee does not bother to understand the provisions of the policy.
Employer Provided Policy Med Mal Coverage
An employer-provided claims-made policy will cover the physician if the policy is in effect when the act of malpractice happens and when the claim is filed. This is true of all claims-made policies, not just those provided by employers. However, when the employer is added into the equations complications arise. For example, if a physician is employed by ABC Hospital and the hospital provides coverage through X Insurance Company, the physician is covered for any malpractice acts that occurred while they were employed at ABC, as long as the claim is filed while they are still employed there/covered by X Insurance Company. Both elements are necessary in order to trigger coverage. The policy must be in effect when:
- The act of malpractice occurs
- The claim is filed
The aforementioned complications arise if the physician leaves the employment of ABC Hospital and is hired by DEF Hospital. DEF covers their employees with Y Insurance Company, and will now cover the physician for any malpractice acts and subsequent claims brought during the policy period established with Y Insurance Company. It appears the physician has handily jumped from the one ship to another, and no point in swimming in open waters. Seemingly, they left the coverage of one company/employer and their coverage was taken over by another company and employer. But the physician is not actually fully covered, because of the two-pronged requirement of claims-made policies.
If during their new employment/policy period with DEF hospital, a patient files a claim against the physician for a malpractice act that occurred while they were employed ABC Hospital, neither X or Y Insurance company is going to cover that claim. Because the malpractice act occurred during their employment with ABC, but the claim was filed after the policy with X Insurance Company was terminated, there is no coverage for the claim. Y Insurance Company will likewise not cover the claim, even though it was filed while their claims-made policy was in effect because the malpractice act that gave rise to the claim did not occur during their policy period.
The meticulous requirements of claims-made policies are certainly not a physician's friend - they were constructed to minimize insurance carriers' risk by tightening the requirements for claims they would cover. When a physician's medical career is split between two employers, the two requirements of a claims-made policy may likewise be split between these two employers, meaning neither will cover a claim. This is why tail and nose coverage exist.
Tail and Nose Policies Under Employer Coverage
Any discussion of employer-provided liability coverage inevitably ties into a discussion of tail and nose coverage. In the situation above, the physician has two options in order to eliminate the vulnerability they face. They may purchase tail coverage for their time working at ABC Hospital, their first employer. In employment contracts, it is possible to devise who exactly would be responsible for paying for tail coverage. The physician may be exclusively responsible, or the employer may offer it as yet another benefit for their employees - in which case there is no dilemma for the physician. Different circumstances may engender the obligation for either party. For example, an employment contract may stipulate that a physician is responsible for their own tail coverage if they quit without cause or are fired for a legitimate reason. It may stipulate that the employer is responsible for tail coverage if the physician is laid off without cause or quits for a legitimate reason. These are examples and the actual nuances of said employment contracts would vary between hospitals; a proactive healthcare provider would go over the specificities with their employer so as to avoid any confusion about tail coverage should employment be terminated by either party under whatever circumstances. The tail coverage, regardless of which party purchases it, would cover that area of vulnerability: claims that are filed during the physician's employment with DEF Hospital, for incidences that took place while the physician was employed and covered by ABC Hospital would be covered by the tail. The length of tail coverage (amount of time the physician would be covered for such claims) depends on the policy, but generally could be a term of 2, 3, 5 years, or up to 10 years. There is also the option of “perpetual” tail coverage, which would not be subject to term limits would provide permanent coverage.