What is professional liability coverage?
Professional liability coverage protects a covered practitioner against allegations of medical malpractice. The Kent Hospital “Medical Indemnification Program” offers professional liability coverage to employed medical staff members, voluntary physicians and their staff.
What is an Occurrence Policy?
This type of policy provides coverage for claims that occur during the policy period regardless of when the claim is reported. The contribution amount is the same as a ‘mature’ claims-made policy, however upon termination of the policy, there is no need to obtain tail or nose coverage.
What is a Claims Made Policy?
This type of policy provides coverage for claims that occur and are reported while the policy is in effect (coverage period). The contribution increases on a yearly basis for up to five years until it is considered ‘mature’.
When a claims made policy is terminated, future claims arising from incidents that occurred during the policy period are not covered unless they had been reported while the policy was in effect. Nose coverage or tail coverage must be obtained upon termination of a claims made policy in order to extend that reporting period.
What is a Retroactive Date?
Your retroactive (retro) date is the first date you begin a claims made policy with the Kent Hospital “Medical Indemnification Program”. If nose coverage is provided, your retro date is the first date of your coverage from a previous carrier. A retroactive date only applies to a claims made policy.
What is Nose Coverage?
Nose coverage, or prior acts coverage, extends to claims arising from acts that occurred before the start date of the policy. An insurer may provide nose coverage by accepting the retroactive date from a previous carrier.
What is Tail Coverage?
Tail coverage extends the reporting period beyond the end of the policy period for a claims made policy. Tail coverage is necessary upon termination of a claims made policy to extend coverage to future claims arising from incidents that occurred while the claims made policy was in effect.
The cost of tail coverage is related to the number of years the physician has been in the program and the physician’s classification.
Why is the cost of an Occurrence Policy higher than a Claims Made Policy?
Initially, the cost of an occurrence policy is higher than a claims made policy. This is because an occurrence policy provides built in “tail” coverage. Claims are covered if they occurred during the policy period, regardless of when they are reported. The contribution amount for occurrence policies must be high enough from the very beginning of the policy to cover claims that might not be reported until many years later.
Claims made coverage only covers claims that are incurred and reported while the policy is in effect. When the claims made policy is canceled, tail coverage will need to be purchased to extend this reporting period.
During the first year a claims made policy is in force, the probability of an adverse event occurring and a claim being made during that same year, is relatively small. Each subsequent year, the probability of a claim against an event that occurred during that year or the original year, increases.
Over time, the probability that a prior event could result in a claim increases. The cost for the coverage of these prior events also increases, usually over a five year period, until the claims made policy becomes mature, at which time the cost of a claims made policy is the same as an occurrence.
Remember, when making decisions regarding your professional liability coverage, the future costs for tail coverage need to be considered.
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