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Malpractice and tail coverage clause

Professional liability insurance: who buys it, the coverage limits, and who pays for tail coverage, which covers claims filed after you leave for care you gave while employed.

Employer-friendly
Physician is responsible for securing and paying for their own malpractice insurance, including tail coverage.
Physician-friendly
Employer provides professional liability insurance with limits of $1,000,000 per claim and $3,000,000 aggregate, and pays for tail coverage when employment ends for any reason.

Sample wording written by Andwise for illustration. It is not model contract language.

Questions to ask

  • Is the policy claims-made or occurrence?
  • Who pays for tail coverage, and does the answer change depending on who ends the contract?
  • What are the per-claim and aggregate limits?

Claims-made, occurrence and tail

An occurrence policy covers incidents that happen while the policy is in force, whenever the claim is filed. A claims-made policy covers claims filed while the policy is in force, so leaving the employer ends coverage for claims that have not been filed yet.

Tail coverage, formally an extended reporting endorsement, covers those later claims. The alternative is prior-acts coverage, sometimes called nose coverage, bought through the next employer's policy. Tail is usually priced as a multiple of the annual claims-made premium, so ask the insurer for the actual figure before signing.

Who pays depends on how the job ends

Contracts often assign the tail cost differently for each kind of exit. Read the clause separately for termination without cause, termination for cause, resignation, non-renewal at the end of the term, and the employer's sale or closure.

Common arrangements include the employer paying when it ends the relationship without cause, the physician paying on resignation, and a cost that shifts to the employer after a set number of years of service.

Find this clause in your contract

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Not legal advice. How a clause works in your contract depends on its exact wording and your state's law. Have an attorney licensed in your state review it before you sign.

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