Why Are You Still Buying Occurrence Malpractice Coverage?
Having malpractice insurance is a must with our current medical landscape. In a survey published by Medscape in 2017, more than half of the 4,000 physicians in question were hit with a malpractice lawsuit by a former patient. And about 87% of those sued were surprised by it. This is a massive survey across 25 specialties that has some knee-shaking results.
The fact is, patients are suing at alarming rates and expecting an easy payoff. And these malpractice suits are more than just a mark on the physician’s reputation. Doctors, physician assistants, and even nurses need their own malpractice policy. A malpractice lawsuit can be time-consuming, costly, and cause a hassle in your personal and professional life. The worst part is, many of these lawsuits come from patients they had five or six years ago. In that time, the physician could have changed jobs, switched insurance policies, or retired.
After that era, physicians can still be liable for malpractice claims. And their coverage depends on what type of malpractice insurance they purchased at the time and what they have now.
The Two Main Types of Malpractice Insurance
Most insurance companies offer one of two malpractice policies. There’s the occurrence policy which covers any suit dealing with incidents from that year. And then there is claims-made, which is the standard insurance that offers coverage while under the policy.
Each policy is nuanced and comes with some benefits and downsides. Let’s break each one down.
Occurrence Policies
If you take out an occurrence policy for the year 2020, any treatment done during that year is covered. It doesn’t matter if it’s 2025 or 2055; the occurrence policy you purchased in 2020 covers you. This idea of continual coverage sounds great in theory. The problem comes when you put it into practice. The policy you had years ago may not be as comprehensive as you’d like it to be.
Here are the upsides and downsides to occurrence malpractice coverage.
- Pros – Occurrence malpractice coverage is a simple and straightforward liability insurance. There is no headache from worrying about coverage when you’re between jobs or in-between insurers. Plus, occurrence policies are less likely to change in price dramatically year to year.
- Cons – That being said, they are more expensive than claims-made policies. Plus, the coverage on older policies will probably be less comprehensive than newer plans. Which means, if it’s a particularly old incident, you might be liable for medical knowledge that wasn’t relevant at the time.
History of Malpractice Coverage
It wasn’t until the 1960s that malpractice lawsuits became part of normal medical culture. Back then, an occurrence policy was the only type of coverage available on the market.
When claims-made policies came out at a significantly lower rate, the medical profession took to the new type of insurance. However, the change didn’t happen all at once. There was one last factor that made a huge difference—the statute of limitations.
Statute of Limitations
Nowadays, states have their own statute of limitations for medical malpractice claims, which limits the liability of physicians to certain timeframes. The standard is two to six years, but there are some cases which extend well beyond that. For example, most states will have an exception for minors who may not know the extent of the damage until many years later.
Claims-Made Policies
Because the statute of limitations is now generally less than six years, physicians don’t need to hold onto occurrence policies that last a thousand years. They only need to be covered for the previous few, which can be insured through a tail coverage.
- Pros – The average claims-made policy is about 50% cheaper than occurrence-based malpractice insurance. It’s a pay-as-you-go insurance for healthcare professionals that covers you while you can afford the premiums. This allows you to scale up or down the coverage as needed. As you further your career, you can increase your policy. As you scale down a practice, you can decrease your premium.
- Cons – The most significant downside is the lack of liability coverage in certain circumstances. If you lose your job or retire without buying additional tail-end coverage, you leave yourself exposed to lawsuits. This can be a hassle that extends beyond your career.
Advancing Careers
Especially early on in your career as a physician, the number of patients under your watch increases linearly with years of experience. It’s only natural that as you get better, you’ll be able to handle tougher workloads and more patients. This, of course, then decreases as you specialize and work with higher-paying patients.
With claims-made policies, each year, you can re-up your malpractice insurance to fit your new needs. With occurrence policies, you’re stuck with what you had.
Which Insurance Policy is Right for You?
There are two types of malpractice policies you can take out to be insured. Occurrence malpractice insurance covers you indefinitely for any incident that arises during the year. Claims-made covers you as long as you pay for it. One grants peace of mind, the other is cheaper and scalable.
Regardless of which malpractice insurance policy you choose, the most important thing is to have some form of malpractice liability coverage. One unfortunately-timed lawsuit can ruin a career and cost you in the hundreds of thousands of dollars.
Sources:
- Medscape. Medscape Malpractice Report 2017 https://www.medscape.com/slideshow/2017-malpractice-report-6009206#1
- NCSL. Medical Liability/Malpractice Statutes of Limitation. http://www.ncsl.org/research/financial-services-and-commerce/medical-liability-malpractice-statutes-of-limitation.aspx