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Who’s Covering Your Tail?

By April 29, 2015 October 6th, 2020 Insurance

There are all kinds of insurance: liability, umbrellas, property, floaters, professional, data breach, you name it, there’s probably a way to cover it. So lets say you’re in the position to give out your professional advice i.e. physician, lawyer, even a contractor, and you are looking at closing up shop and retiring. What happens to your insurance coverage? Specifically, what happens if you have a claim after your insurance expires? You’ll be happy to find out that that there’s insurance coverage to cover your insurance that’s no longer there.

After practicing at a hospital for a few years, you’ve taken a new job in another state. Your current malpractice carrier doesn’t write policies in the state where you’ve relocated to, so you decide to cancel your policy and sign on with a new insurer. A year later, you’re sued over an incident that occurred while you were working under your previous employer. You’ve had uninterrupted insurance, so you assume you’re fine. But — are you truly covered? The answer depends on what kind of policy you have. Every state has a limit on their statute of limitations, but some plaintiffs can take years to file, not including the time it takes to make it’s way through the legal system.

The most crucial thing to know when looking at tail insurance is whether or not it is a “claims made” based policy or a “per occurrence” based policy. An occurrence policy provides coverage for alleged incidents (injuries) that happened during the policy year regardless of when the claim is reported to the carrier. The occurrence policy provides a separate coverage limit for each year the policy is in force. It does not matter if the policy is active when the claim is reported. It only matters that the policy was active when the alleged incident occurred. A claims-made policy covers the insured for an incident that occurred during the policy period and was reported as a claim while the policy remained in force. When you start a claims-made policy, the original inception date, known as the retroactive date, becomes a permanent part of the claims-made policy.

Even though you’ve stopped working may not necessarily mean you’re not still vulnerable from a legal standpoint. Tail insurance is there to make sure that the vulnerability is extinguished. Which basis, whether is be “claims made” or “per occurrence” is going to depend on each personal situation. Either way, it’s good to know someone will have your tail.

If you have questions regarding your insurance, ECI is always here to help.