Occurrence VS. Claims Made Medical Malpractice Policies

If you’re hit with a medical malpractice lawsuit, the settlement could easily be for hundreds of thousands of dollars – and possibly much, much more. Given the jaw-dropping amounts possible, it’s clear that medical professionals need to protect themselves with medical malpractice insurance. What may be less clear, however, is whether you should go with an occurrence or claims-made policy.

The Cost of Medical Malpractice Lawsuits

According to MD Linx, the Family Physician Malpractice Report found that 49% of family physicians have been named in a medical malpractice suit. And while plaintiffs don’t always win, when they do, the amounts can be staggering. In one recent California case, a jury awarded $9.25 million in non-economic damages, as well as $22,246 in economic damages, after a larger-than-expected mass led to a difficult surgical decision.

Most cases won’t see awards or settlements that are nearly that high. Nevertheless, the legal costs can add up. Even if states where medical malpractice insurance is not legally required, physicians have strong motivation to maintain coverage.

But simply purchasing coverage may not be enough. You also want to make sure that you have adequate coverage, and that any claims will be covered. This is why it’s important to understand differences in policy types, including claims-made versus occurrence.

Claims-Made vs. Occurrence

Occurrence policies provide coverage based on when the alleged injury occurs. If the alleged injury happened while an occurrence policy was in force, coverage is provided, regardless of when the claim is reported.

Claims-made policies, on the other hand, provide coverage based on when the incident occurs and when the claim is reported. The policy will have a start date or retroactive date, injuries will be covered if they occur on or after this date and only while the policy is in force. If the policy is canceled for any reason a tail or extended reporting period must be purchased from the start date/retroactive date to the cancellation date to provide future coverage.

This difference is very important because there may be a large gap between when an alleged injury occurs and when the claim is made. In some cases, the injury may not be known for years. So what happens if the physician had insurance at the time of the injury but not at the time of the claim? The answer will depend on the type of policy.

With an occurrence policy, as long as the policy was in force at the time of the injury, it will be covered, even if the physician has since retired or coverage has been cancelled. With a claims-made policy, claims that are made after coverage is terminated may not be covered unless a sometimes costly tail or extended reporting period is purchased.

Tips for Medical Professionals

You don’t want to find out that a claim isn’t covered after the fact. Take steps to protect yourself now.

• Know what type of insurance policy you have and how it works.
• Be sure you know what dates are covered for both injuries and claims, and that these dates cover you fully.
• Maintain continuous coverage. If you switch policies, know whether your policy type is also changing, and make sure you aren’t left with coverage gaps.
• If you have a claims-made policy and you cancel the policy or retire, it’s important to maintain adequate coverage. This can be done through the purchase of tail or an extended reporting period policy.

If you have any questions or would like a coverage review, contact our Medical Malpractice Insurance team.