Tail Coverage / Who is Going to Cover My Tail?
by Bo Claypool
If you are already familiar with the concept of what tail coverage is please feel free to skip to paragraph 4. If you are in the role of physician recruiter or in the process of recruiting a physician and are unfamiliar with the concept then do not worry, as we have seen many a physician, administrator, etc. who has never had to deal with either the arrival or departure of a physician and has therefore not encountered the term before.
To understand tail coverage, you must recognize that in the world of professional liability or “malpractice” coverage there are two types of policies; “claims made” and “per occurrence.” The full explanation between the difference between the two types, and the rationale for one over the other is beyond the scope or interest of this article. All that is needed to know is that a) “claims made” policies have become commonplace and “per occurrence,” while still available in some markets, has fallen into all but total obsolescence and b) with a “claims made” policy, in the event that a physician wants to seek employment elsewhere or leave their carrier for whatever reason, very often supplemental insurance or “tail coverage” is needed to cover the physician for any claims made after they have left their prior carrier but in which the alleged claim of malpractice actually occurred while they were covered by the prior carrier.
In other words, if Family Practitioner X is under a claims made policy while working for Family Practice Y and subsequently wants to terminate employment and join Family Practice Z, lest Family Practice Z has the same carrier as Family Practice Y and the carrier also provides for reciprocity between the two groups, Family Practitioner X will need tail coverage to protect both himself and his prior practice Y against any claims made after he has left, but in which the disputed event took place during his tenure with Family Practice Y. Also, note that tail coverage varies in price according to a number of factors, but generally speaking the largest factor is, as determined by an actuary, how prone their particular specialty is toward claims of malpractice. So, tail coverage for a primary care physician is going to be much less than, say, an obstetrician or perhaps an orthopedic spine surgeon. Now that you have been given a very cursory primer, the question remains…
Who pays for this? Is it the responsibility of the physician, the prior group or the new group? An argument can be made for all three: 1) It can reasonably be argued that the physician whose professional service that needs to be covered should pay for it since they could be potentially bankrupted absent a “tail” but 2) It can also be reasonably argued that the prior group has some responsibility because most plaintiffs attorneys seeking remedy on behalf of their client will not only sue the physician in question but also the group they belonged to since often the group as a whole is of much greater financial wherewithal than the individual but 3) It can also be reasonably argued that the entity the physician is joining should pay for the cost of tail coverage, since if they do not it is often the case that the physician cannot afford it on their own and the group they are leaving may very well not want them to leave.
The answer is not necessarily cut and dry, but our opinion as experienced and professional physician recruiters is that the hiring entity should take the stance with respect to all physician candidates that it is reasonable to make it easy for a physician to join your group but it is not your responsibility to make it easy for them to leave. In other words, you probably need to at least share in the cost of covering your doc’s tail, if not paying for it outright. Furthermore, you should stipulate in their employment contract that should they leave of their own volition, or if fired with cause then they are responsible for the cost of tail coverage. It is generally accepted that only in the case of a physician being let go without cause should the practice dismissing them be on the hook for tail coverage.
With that said, I am well aware that as a hiring entity, the prospect of paying for tail coverage can strike you as rather costly. Such is especially true if you are in a specialty prone to malpractice complaints; as physician recruiters we have seen plenty of six-figure tails. If you are in such a specialty, really one of the only ways around such an expense is by hiring someone right out of training, but as contemplated on another article on this website that strategy in and of itself can be problematic. Furthermore, you may want someone who is not right out training and/or it may not make sense to hire someone that green.
Here’s another proposition, which is generally considered as reasonable but will differ by specialty and with location. Perhaps cover their tail entirely, but structure it as a loan with, say, a two year forgiveness period. This will help encourage them to stay for at least the length of the forgiveness period. In other words, cover their tail but attach some strings that benefit you.
This is just one of a number of novel ideas we have had as experienced physician recruiters. To talk to us further about this topic or others related to physician recruitment please feel free to contact us by phone at 312-83-4DOCS (3627) or by filling out the form below.