By Stuart E. Hoffman, DC, FICA
ChiroSecure President
Many doctors I speak with each day do not seem to have a proper understanding of the kind of coverage they have under their professional liability insurance, or how their premiums are priced. I will try and explain as simply as I can the difference between an occurrence policy and a claims-made policy.
Your professional liability (Malpractice) insurance policy through ChiroSecure is designed to provide you with protection from allegations of negligence (true or false) that arise from your professional services as a licensed Chiropractor.
If your policy is written on an “Occurrence” policy form
An occurrence policy we view in concept as an owner’s policy. If you purchase 1 yr, 5 yrs, or 10 yrs. etc. of coverage, you own that coverage indefinitely. In other words, you can cancel your policy at any time and know that the period of time you paid for remains in place, should an incident be reported after the policy is no longer in force.
Claims are handled on the basis of when the actual incident occurs. For instance, if an occurrence policy issued in 2006 and is terminated in 2008 any incident that occurred during that time period would be covered, even if they aren’t discovered and reported as claims until 2009. In other words, once you have paid for coverage for a particular period, you will always be covered for any incident that arises during that covered period no matter when the claim is actually made. This is true even if you have dropped your coverage or moved your policy to a new company. The insurance company that was underwriting the coverage during the period that the incident occurred will be the same company that handles the claim on your behalf.
If your policy is written on a “Claims-Made” policy form
A Claims Made policy we view in concept as a renter’s policy, similar to Term Life Insurance. Your claims-made policy provides coverage for claims-made and reported to your insurance provider while the policy remains in force. In other words, your policy must be in force on the date the Chiropractic incident occurred and also on the date you first reported (with no lapse in between) the claim to your insurance provider.
For Example:
[table class=”table_blue”]
| Policy in force: | Sept 1, 2006 through Sept 1, 2007 |
| Date of incident: | January 10, 2007 |
| Date claim is reported: | March 15, 2007 |
[/table]
The claim in the example above is eligible for coverage because the policy was in-force both on the date of the incident and on the date the claim was reported.
*IMPORTANT – if a Claims Made policy is not kept active – you cancel your policy due to a move, you are no longer practicing, decide to take time off from practice, your policy is cancelled due to non-payment etc – all coverage will be lost back to the date of inception, known as the retro-active date on the policy, unless “Tail” Coverage is purchased or obtain through the carrier – leaving the doctor without coverage.
Example: Your coverage was in place from January 2006 – January 2009 at which time you cancel you policy – all coverage will disappear as though you never had it, leaving the doctor bare from January 2006 – January 2009 unless “Tail” Coverage is purchased upon termination of the policy.
Tail Coverage
Suppose your claims-made policy expired when you retired from practice last year but you are served with a lawsuit claiming injuries for services rendered by you last year while you were still in practice but you never reported the incident. The extended reporting period endorsement, also known as “Tail” coverage, allows you to report this claim after the policy has ended. Tail coverage provides protection for covered claims that arise out of incidents which occurred during the policy period, up to the date the policy expired and reported after the expiration date of the policy.
For Example:
[table class=”table_blue”]
| Policy in force: | Sept 1, 2006 through Sept 1, 2009 |
| Tail coverage purchased: | Sept 1, 2009 |
| Date of Chiropractic incident: | January 10, 2008 |
| Date of Lawsuit: | October 1, 2009 |
| Date claim is reported: | October 2, 2009 |
[/table]
The claim in the example above is eligible for coverage because the policy was in-force on the date of the incident and the tail coverage was in-force when the claim was reported.
Tail coverage is available if you are eligible and you want it within 30-60 days (depending on policy) of your policy expiration. Generally, you must request the “Tail” in writing and have it paid in full before that timeline expires or you may never be able to get that coverage back. There is typically a charge for tail coverage which must be paid promptly when due. Most policies provides for free “Tail” in certain situations like retirement, # of years maintaining policy in good standing, permanent disability, or death.
Without tail coverage, there would be no coverage for claims not reported prior to the expiration date of the policy. In effect, tail coverage extends your ability to report a claim, so you are still protected against claims for incidents that occurred during a prior covered policy period.
The Cost. Why does it seem to increase every year?
Many individuals new to claims-made insurance coverage believe their premiums increase every year. The reality is that claims-made policies are actually discounted for the first four years until the fourth/fifth year when the policy hits its “mature” rate. Premiums in the first year are lower and increase over the next four years of coverage to reflect the increased likelihood of claims from the current and previous policy periods.
For example, the first year premium is at its lowest because there is no prior risk or liability to cover. The second year the premium “steps up” to account for the risk assumed for that first year of coverage, and so on. The premiums have to catch up to (usually within approximately 5%) the Occurrence type policy.
For example:
[table class=”table_blue”]
| Step | Claims-made | Risk Exposure |
|---|---|---|
|
First year: |
$640 |
Minimal |
|
Second year: |
$1,140 |
1 year of exposure |
|
Third year: |
$1,540 |
2 years of exposure |
|
Fourth year: |
$1,680 |
3 years of exposure |
|
Year 5 + (Mature): |
$1,980 |
4 years of exposure |
[/table]
In the scenario above, year 5 is considered “mature” and each year after Year 5 will no longer be subject to increased “step” premium unless there is an across the board rate increase.
Don’t Leave Yourself at Risk
The bottom line is, learn the details of your coverage so you know that you are adequately covered and you are not caught unaware. You could be left with a gap in coverage by letting your policy lapse or changing your policy from carrier to carrier.
Stuart E. Hoffman, DC, FICA, is the president of ChiroSecure, the only malpractice insurance program endorsed and approved by the International Chiropractors Association. Dr. Hoffman is a highly experienced doctor of chiropractic and licensed insurance broker who knows the intricate details of daily practice and who can give you the best advice based on his unique knowledge of both the insurance world and the world of chiropractic. To find out how you can get liability protection at the best rates call Dr. Hoffman at 1-866-802-4476 or visit www.chirosecure.com www.facebook.com/chirosecure