In our practice as an Atlanta and Augusta health care law firm, we see varying options regarding professional liability insurance coverage made to physicians in their employment agreements. All doctors apprehend in general that there are financial risks associated with potential malpractice claims. While the need to obtain liability insurance is obvious, the right coverage for particular circumstances and how coverage works can be less obvious. Understanding the type of professional liability coverage proposed in a physician employment agreement and how the coverage mechanics work is an essential first step for physicians who desire a physician employment agreement that will truly protect their long-term financial interests.
The first type of coverage is “occurrence-based” professional liability insurance. Occurrence-based coverage provides lifetime coverage for incidents that occurred during the insurance policy period. This means that even if the policy lapses or is terminated, if a claim is made concerning an incident that occurred while the policy was in force, the claim is covered under the policy. Generally speaking, professional liability policies will define “occurrence” as the actual act or omission of the physician, not the injury of the patient.
A “claims-made” policy, on the other hand, only covers incidents that occurred and were reported during the policy period. If a claims-made policy is dropped or expires, any claims asserted thereafter are not covered, even if the incident occurred during the policy period. Where a physician’s professional liability policy is a claims-made policy, the physician (or his employer) may purchase an “extended reporting” endorsement, otherwise known as “tail” coverage, to cover claims asserted after the policy period.
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