Expert Consult: Claims Made vs. Occurrence Malpractice Insurance

Today, I'm pleased to have John Miller from Sterling Risk Advisors explain the difference between claims made and occurrence medical malpractice insurance. John is a founder and principal at Sterling Risk Advisors in Atlanta, GA and writes medical malpractice insurance for private practice physicians as well as healthcare corporations.

One of the benefits of working with me at Lotus Wealth Solutions is that I've assembled a team of experts who can provide their expert advice on more complex matters in a particular area such as insurance planning, tax planning, estate planning, and investment planning.

Periodically I'll have an expert write a short post on Lotus Wealth Advice. Let's see what John has to say about claims made vs. occurrence malpractice policies:

The terms “Nose” and “Tail” are easily understood when referring to a horse or an airplane; however, this slang when used to describe malpractice insurance coverage often leads to misunderstandings.  Here is what physician employers and physician employees need to know about these terms:

Let’s start with how claims-made (“CM”) malpractice insurance works.  CM refers to what triggers the coverage under the policy.  A claim is considered valid under a CM policy if three things are true:

1)     the medical care giving rise to the claim occurred after the “retroactive date” on the policy;

2)     the report of the claim was made before the expiration date of the policy; and

3)     there was no previous report or knowledge of the claim under a prior policy.

How does this differ from occurrence (“OCC”) coverage? 

In order for a claim to be considered valid under an OCC policy, the medical care need only have been provided during the policy term regardless of when the patient brings a claim against you.

The best way to understand this difference is to use an example. Let’s say you saw a patient on July 4, 2008 and clearly failed to diagnose a condition that resulted in significant complications and costs for the patient. In order to turn a claim in under an OCC policy you need only to have had an OCC policy in force on 7/4/08, no matter when the patient’s attorney later contacts you alleging negligence. In order to turn a claim in under a CM policy, your “retroactive date” (demarcation date reflecting the first time a physician obtained CM malpractice insurance) would need to precede 7/4/08 and you would have to have a policy in force as of the date you receive the lawsuit.

Because a claim must be made while a CM policy is in force and coverage reaches retroactively, this feature is referred to “Nose” coverage, “Prior Acts” or “Retroactive” coverage. CM policies must be continued indefinitely to assure coverage for claims filed in the future for actions that occurred in the past. That’s where “tail" coverage comes into play.  Technically referred to as an Extended Reporting Endorsement (“ERE”), “tail“ coverage allows a physician covered by a CM policy to report into the future claims that relate to professional services rendered between the physician’s retro date and their last day of CM coverage.  An ERE effectively turns a CM policy into a long OCC policy.

About the Author

John W. Miller II is a founding Principal of Sterling Risk Advisors and has over 16 years of experience in providing risk management and commercial/professional insurance solutions to clients throughout the United States.  Based in Atlanta, Sterling provides both insurance brokerage and consulting services to over 2,000 physicians and 800 other medical providers throughout the Southeast.  Mr. Miller writes medical malpractice insurance and related coverages for private practice physicians as well as healthcare corporations.  He can be reached at (678) 424-6503 or jmiller@sterlingriskadvisors.com.

I'd like to thank John Miller for his contribution to Lotus Wealth Advice. Stay tuned for more Expert Consults in future Lotus Wealth Advice posts.

Download a pdf copy of this post here: Claims Made vs. Occurrence Malpractice