CLAIMS-MADE or OCCURRENCE
When it comes to healthcare liability insurance, you’ve got two coverage choices – Claims-made or Occurrence.
SO, WHAT’S THE DIFFERENCE?
In 1899, a small group of doctors pooled their resources to protect their reputations and assets from a newly discovered risk: medical malpractice. When drafting the insurance policy to bind them all together and shield them from this risk, they sought to ensure adequate financial protection for decades of practice. To achieve that objective, the doctors formed what would later be called Occurrence coverage.
Occurrence coverage became the industry standard for the next 70 years; however, when medical malpractice claims spiked during the 1970s, most insurance companies stopped offering Occurrence coverage and only offered Claims-made coverage. Both policy types remain today.
Occurrence coverage is triggered the moment treatment occurs, regardless of when an eventual claim is made. For example, if a claim is made today based on treatment rendered in 2018, the 2018 Occurrence policy responds.
Claims-made coverage is triggered when the claim is made. For example, if a claim is made in 2020 based upon treatment rendered in 2018, the 2020 Claims-made policy responds, as long as the healthcare incident occurred after the policy’s retroactive date. (The policy’s retroactive date is the date after which treatment must occur to trigger coverage.)
SELECTING YOUR POLICY TYPE IS ONE OF THE MOST SIGNIFICIANT DECISIONS YOU’LL MAKE FOR TWO REASONS:
LIMITS – with Occurrence coverage, you receive a separate set of limits every year you have the coverage. Also, Occurrence policy limits remain in place after the end of the policy period to pay claims arising from healthcare incidents occurring during the policy period. In contrast, with Claims-made coverage, only the then-current policy limits are available to pay claims made during the policy period, and even then only if the treatment occurred subsequent to the policy’s retroactive date.
“TAIL” COVERAGE – Tail coverage protects a healthcare professional against all claims arising from professional services performed when the Claims-made policy was in effect, but the claim was reported after termination of the policy. Since Claims-made policies do not cover claims made after the termination of the policy, you are required to secure “tail” coverage (an extended reporting endorsement) when you move your coverage from one carrier to another or stop practicing. If a claim is made against you, and you have cancelled a Claims-made policy, you have no coverage unless you have either secured tail coverage or your new carrier covers your prior acts back to your retroactive date. If you switch to a MedPro policy from another carrier, the majority of healthcare professionals will qualify for free tail coverage after they retire (if mature Claims-made) if they have been insured with MedPro for at least one year. Occurrence policies do not require tail coverage.