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Types of Medical Professional Liability Policies
Occurrence
Vs. Claims Made
Understanding the types of medical professional liability insurance policies
that are available is important. There are two basic policies, Occurrence
and Claims-made.
Occurrence
Coverage
This kind of policy provides coverage for claims that may arise from incidents
which occurred while you had a policy in force, regardless of when a claim
is reported, even if the policy is no longer in force. Thus, occurrence
coverage provides long-term continuing protection for the physician.
For example: A physician had
an Occurrence policy in effect from January 1990 to January 1998, at which
time the existing policy was not renewed. In February of 1999, a patient
treated in 1997 filed a claim against the physician. Since the physician
had an Occurrence policy in effect in 1997, the company that insured him
in 1997 would defend him, based on the 1997 coverage.
Claims
Made Coverage
This type of policy provides protection for claims that 'arise and are
reported' while you have a policy in force. You are covered up to the
policy limits in effect at the time the claim is reported. Therefore,
a physician is only covered if the claim is actually filed while the policy
is in force. To be protected for claims which are reported after the policy
has been cancelled, you must purchace 'tail
coverage', (Extended Reporting Period endorsement), or
obtain similar protection from a subsequent carrier. A claims made policy
must continue in force to provide protection, or be replaced by tail coverage.
When you elect to change claims made carriers, 'Prior Acts Coverage' must
be obtained to cover your exposure from your first day of claims made
coverage.
For example:A physician had a claims made policy from January 1990 to January 1998, at which time the policy was not renewed, and tail was not purchased. In February 1999, a patient treated in 1997 files a claim against the physician. The physician would have no protection against this claim, because the claim was not reported during the policy period.
Pricing
Occurrence rates are usually the basis for pricing of medical professional
liability insurance.
During the first few years of coverage, Occurrence coverage rates are generally higher than Claims Made coverage. This is because the cost of claims that may be reported at some unknown time in the future is taken into consideration in the determination of Occurrence rates. The Claims Made rates increase annually, until they reach 'maturity', generally in the eight year.
Claims made coverage takes into consideration the insurance company's exposure to claims that may be reported on a year to year basis. The longer the period you are insured with a company, the greater the possibility of a claim being reported; thus, the annual premium increases.
