Maintaining malpractice insurance, or professional liability insurance, is a requirement to practice medicine. As such, it is one of the most important things to review in any physician contract.
Employers often provide and pay for a physician’s medical malpractice insurance coverage as a benefit or condition of their employment. But the physician must ensure that they have appropriate medical malpractice insurance coverage following termination, and that they avoid having gaps in their coverage history.
What’s the difference between types of malpractice?
There are two basic types of coverage: occurrence-based and claims made. Occurrence-based policies cover incidents arising from the coverage period, no matter when the claims are reported.
By contrast, claims-made policies coverage only claims that are made while the policy is in effect. Once the policy premiums are no longer paid, the coverage lapses and any claim made after the lapse will not be covered, even if it relates to something that happened while the policy was in effect.
Hospitals often provide occurrence-based malpractice insurance but in the event that a physician is offered a claims-made policy, they should request that the hospital cover the costs of obtaining an extended reporting endorsement (also known as “tail coverage”) that extends the liability coverage after expiration of the policy paid for by the hospital.
So who pays for tail coverage?
While premiums on tail coverage can vary widely between states and specialties, they can be very expensive, so this is an issue which should certainly be negotiated with the hospital. Failure to ensure that there are no coverage gaps may expose the physician to unnecessary liability and may also result in a breach of a post-termination obligation under the physician’s employment agreement.
As such, while reviewing an employment contract a physician should make sure that they understand any requirements in their written employment agreements concerning medical malpractice insurance coverage and post-termination obligations.
It is always a good idea to have an attorney well-versed in contract law and physician contracts particularly to review a contract to ensure that the physician is not left “going bare,” or uninsured as to liability assumed under the contract.
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