I’m frequently asked whether tail coverage for professional liability should be purchased. The doctor may be retiring. May be moving from state to another. Or just changing carriers.

The first question is whether tail coverage even applies. If you have what is known as an “occurrence” policy, tail coverage is already bundled in. In an occurrence policy, you are covered based on when the triggering event occurred. Hurray.

But, most policies sold today are not occurrence policies. The reason: They are more expensive.

Most policies sold are what is known as “claims made.” You are covered when the claim is reported (that is, when a lawsuit if filed and you file the claim with the carrier). Because there is typically a lag between the triggering medical event and the filing of a lawsuit, you need to have coverage for two events – the medical event and the lawsuit. So, here a tail policy would be relevant. The medical event has already occurred, but you do not know if and when a future lawsuit will be filed. With claims-made policies you would want tail coverage to address this future possibility.

I often hear this refrain.

“I don’t know of any patient who had a complication or injury. I feel pretty good about avoiding the cost of tail coverage. I don’t think I’ll ever be sued.”

My response typically is: How would you know? What about known unknowns? And unknown unknowns? What if you missed a diagnosis and the patient never returned? What if the patient followed up with another doctor and threw you under the bus? What if you accidentally left a sponge in the patient in spite of a normal sponge and needle count?

My point is YOU DON’T KNOW.

The benefit of tail coverage is that you are paying to mitigate the risk. Maybe you won’t be sued. Great. I never feel cheated with my life insurance policy if I don’t die. But if you do get sued, you’ll be glad you have the coverage.

I recently received a call from an internist who worked 20 hours a week at a prison. He also worked in private practice. He left the prison gig three years ago without purchasing tail coverage. A prisoner with nothing but time on his hands filed a lawsuit against the doctor. The doctor will likely prevail. But, he has to respond to the lawsuit. He does not want to risk a default judgment. So, now he’s paying out of pocket for an attorney to help. The attorney is hired is brilliant. But he’s got to be paid.

Finally, when you start a job with a group or hospital, clearly delineate who pays for tail coverage in the employment agreement. If the matter is left silent, at exit, fingers will be pointed. And that matter will be ripe for litigation. Address it up front.

In short, tail coverage is not a luxury. It’s a necessity for sleeping well at night.

What do you think?