The Stand-Alone-Tail
Dr. Alexis Goldman, a cardiologist in New York was all set to start her new life. For 25 years, Dr. Lexi, as she was known to her patients, had worked tirelessly to save lives and improve the quality of life for her patients. Now, the caregiver was planning to take a 24-month leave of absence from her hospital in order to start a free clinic for low-income seniors in Harlem.
Everything was going swimmingly and moving in the right direction until Dr. Goldman received the final bill from her medical med mal company. Since Dr. Goldman had a claims-made policy and she was not officially retiring from practicing medicine, she was required to purchase a tail. As she read the statement her heart sank; the insurance company was requiring that Dr. Goldman pay $120,000 for the tail! Dr. Goldman had saved enough money to forgo a salary for two years in order to treat low-income patients. This new bill would wipe out a very large part of her savings. All of a sudden the dream of opening her own clinic seemed to be slipping away and Dr. Goldman needed to know her options.
Dr. Goldman called me that afternoon. She explained to me that her tail quote from her current liability company was twice what she paid for coverage last year. She was confused as to why the cost of coverage was so high and felt she was singled out by the insurance company. After assuring Dr. Goldman that she was not targeted individually, I started outlining her options.
Claims-Made Policy with Prior Acts Coverage
The good news for Dr. Goldman was that she had several options. The first thing I explained to Dr. Goldman was that she could get a new policy for her clinic coverage that included prior-acts. This meant that the new insurance policy would match the retroactive date of her previous policy and cover any claim that stems from her previous practice. The issue with covering the prior acts is that the cost of coverage would remain high because she would maintain a mature claims-made policy. The quotes coming in from the insurance companies were much lower than the $120,000 tail quote but they were still relatively high averaging about $45,000 -$55,000 per year.
Stand-Alone-Tail
I recommended to Dr. Goldman that she purchase a stand-alone-tail and restart her insurance at the clinic with a 1st year claims-made policy. Dr. Goldman was skeptical until I explained her options in more detail.
Typically the incumbent insurance company that is offering the tail quote provides the best option to a physician. Most “admitted” insurance companies offer a tail that is lifetime in length and features all the bells and whistles that come standard in their policy. Conversely, a stand-alone-tail policy usually provides an additional 2-4 years in length of coverage. It is important to know the statue of limitations in your specific state so that you can make a well-informed decision regarding a stand-alone-tail. In addition, the typical stand-alone-tail policy is probably not going to be as robust as the incumbent tail; many stand-alone-tails have a deductible and may contain a “hammer–clause” that should be well understood before making any decision.
Purchased Stand-Alone-Tail and New 1st year Claims-Made Policy
Once we laid out all the options for Dr. Goldman, she decided to purchase a 2-year tail from a large Risk Retention Group. The total cost of the tail was $65,000.00. Then we were able to find a new 1st year claims-made policy for Dr. Goldman’s new position at the clinic for approximately $6,200 for a grand total of $71,200. Although this was still more that Dr. Goldman wanted to spend, it still represented a total savings of $55,000.00. We like when doctors save that kind of money on their medical liability insurance.
If you would like to learn more about stand-alone-tails or have a question about your med mal policy, please feel free to contact me, Jason Leander, at jleander@cg-ins.com or call me at 1-800-962-1224.
Disclaimer: This article is written from an insurance perspective and is meant to be used for informational purposes only. It is not the intent of this article to provide legal advice for any specific fact, situation or circumstance. Please contact legal counsel for specific advice.
