Definition
Tail Coverage is an extension you can purchase for a claims-made malpractice insurance policy after it ends. It allows you to report claims in the future for incidents that took place while your policy was still active. Without it, you are uninsured for any claim filed after your policy’s termination date, even if the patient’s care happened years earlier when you were fully insured.
This coverage is a one-time purchase and its premium is typically 1.5 to 3 times your final annual premium.
Why This Matters to Healthcare Providers
If you have a claims-made policy, you face a coverage gap the moment your policy ends due to retirement, a practice sale, or a change in employers. A new policy from a new insurer will not cover your prior work. Tail Coverage is the product designed specifically to close this gap and protect your personal assets from lawsuits related to your past practice.
Example in Healthcare M&A
Scenario: Your surgical practice is being acquired by a private equity group in an Asset Purchase. This deal structure means the buyer forms a new company and your original practice entity, along with its claims-made malpractice policy, will be terminated at closing. The responsibility for securing Tail Coverage is a key point in your negotiations.
Application: You and the buyer agree that you, the seller, will be responsible for the cost. You purchase a tail policy from your previous insurer. A year after the transaction closes, a patient files a lawsuit alleging a surgical error from two years prior to the sale.
Outcome: Because you purchased Tail Coverage, your old insurance carrier handles the claim, covering your legal defense and any potential settlement. Without it, you would face the lawsuit personally, bearing the full financial burden and putting your sale proceeds and personal assets at risk.
Related Terms
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Frequently Asked Questions
What is Tail Coverage in malpractice insurance?
Tail Coverage is an extension you can purchase for a claims-made malpractice insurance policy after it ends. It allows you to report claims in the future for incidents that occurred while your policy was active.
Why is Tail Coverage important for healthcare providers?
Healthcare providers with claims-made policies face a coverage gap once their policy ends due to retirement, practice sale, or employer change. Tail Coverage closes this gap, protecting personal assets from lawsuits related to past practice.
How much does Tail Coverage typically cost?
Tail Coverage is a one-time purchase and its premium is typically 1.5 to 3 times your final annual premium.
What happens if Tail Coverage is not purchased when a surgical practice is acquired?
Without Tail Coverage, a lawsuit filed after the policy ends for incidents during the effective policy period would leave the healthcare provider personally liable, risking sale proceeds and personal assets.
How does Tail Coverage work in an Asset Purchase transaction?
In an Asset Purchase, the original policy ends when the practice entity is terminated. The seller purchases Tail Coverage to cover claims filed after the sale for incidents that occurred while insured, ensuring legal defense and potential settlements are covered by the old insurer.