HOW ARE
CLAIMS MADE AND OCCURRENCE POLICIES DIFFERENT?
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Professional
liability policies are written on either an “occurrence” or
“claims-made” basis. Neither basis is necessarily better than
the other, but knowing which you have can be absolutely
critical in preventing dangerous gaps in coverage.
CLAIMS MADE
COVERAGE
Claims
Made Policy Summary —
The claims made policy protects you against incidents that
arise from treatment provided after your policy’s retroactive
date and are reported while your policy is in force. Your
retroactive date usually reflects the date your policy
started. As long as you continuously renew your claims made
policy, you may report claims for incidents that occurred in
previous policy years, back to the beginning of your claims
made coverage.
Example
of Claims Made Policy Coverage —
You became a Claims Made policyholder in 1995 and have renewed
your policy continuously since then, with no lapse in
coverage. A patient you treated in 1997 files a claim against
you now. Because you have renewed your policy continuously
since 1995 and it is currently in force, you are still
protected for that 1997 incident.
Benefits
With a Claims
Made policy, the only insurance carrier you need to be
concerned with is your current carrier. Instead of being sued
and trying to figure out which former occurrence policy was
covering you the year incident occurred and hoping that
carrier is still financially viable to defend your claim, all
claims brought are handled by your existing Claims Made policy
regardless of when the incident occurred, pursuant to your
retroactive date.
The premiums in
the initial years of a Claims Made policy are generally less
than those of an Occurrence policy offering similar coverage.
In general, a Claims Made policy will save you money over an
Occurrence policy after just three years.
Limits
of Liability —
With a Claims Made policy, the limits of liability in effect
when the claim is made are the limits that apply toward any
settlement or judgment.
Example
of Limits of liability —
In 1995 your Claims Made policy had limits of liability of
$100,000/$300,000. Then, in 1998, you increased your limits to
$1 million/$3 million. Also in 1998, a patient you treated in
1997 files a malpractice claim against you. Which limits of
liability apply? The $1 million/$3 million limits of the
current policy year apply because those are the limits in
place when you reported the claim.
Tail
Coverage for Claims Made Policies
Extended Reporting Period —
If you decide to discontinue your Claims Made policy, tail
coverage is available to extend your claims reporting period.
Definition —
Tail
coverage is optional protection that allows you to report
claims after your policy has ended for alleged injuries that
occurred while your policy was in force. It is
necessary only if you discontinue your Claims Made policy.
Cost — Tail coverage is a one-time fee that’s calculated as a
percentage of your annual premium. When you purchase tail
coverage, your policy’s existing limits of liability are
reinstated and are extended for a specified period of time to
pay claims reported in the future.
Benefit — Tail coverage is a great way to protect yourself from the
unexpected sting of future claims, and will provide you
long-term protection and peace of mind.
Example
of Tail Coverage —
In 1995 you purchased a Claims Made policy. In 1997 you
discontinued your policy and purchased tail coverage to extend
your claims reporting period. In 1999, a patient you treated
in 1996 files a malpractice claim against you. Because you
purchased tail coverage when you left, you may report that
claim in 1999 for the 1996 incident.
OCCURRENCE
COVERAGE
Occurrence Policy Summary —
The Occurrence policy protects you against incidents that
occur while the policy is in force, regardless of when the
claim is reported.
Example
of Occurrence Policy —
You became an Occurrence policyholder in 1994, and
discontinued the policy in 1996. A patient you treated in 1995
files a malpractice claim against you now. Because the patient
was treated while the policy was in force, you’re able to
report the claim in 1998 for that 1995 incident.
Benefits —
This policy automatically protects you both now and in the
future for any incidents that occurred while you were a
policyholder. This means that you can report claims:
During the
current policy year, and;
After your
policy has ended.
Limits
of Liability —
With an Occurrence policy, the limits of liability in effect
when the treatment (prompting the claim) occurred are the
limits that apply toward any settlement or judgment costs.
Example
of Limits of liability —
In 1993 your Occurrence policy had limits of liability of
$100,000/$300,000. Then, in 1998, you increased your limits to
$1 million/$3 million. Also in 1998, a patient you treated in
1994 files a malpractice claim against you. Which limits of
liability apply? The $100,000/$300,000 limits of the 1994
policy year apply—because those were the limits in place when
the treatment prompting the claim occurred.
Tail
Coverage —
Tail coverage is unnecessary if you discontinue this policy
because the cost of extending your claims reporting period is
built into the annual premium.
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Circadian Insurance Brokers
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Brentwood, CA. 94513
Toll Free: (877) 417-7171 • Tel: (925) 417-8500
• Fax: (866) 356-4429
California
License #: 0F79348
If you're a licensed
professional looking for professional errors & omissions or
medical malpractice insurance in California, we can help. Our
California insurance agency offers full professional insurance
coverage as well as commercial, life and health, and employee
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