What Happens to Your Malpractice Coverage When You Leave a Practice?
Posted in: Commercial Insurance
An Introduction to Sherman’s Law of Malpractice Insurance
Like all professions, from time to time, physicians experience changes in employment. If you are a doctor who’s considering joining a new practice, starting your own practice or retiring, then you need to be sure you are protected from a lawsuit resulting from your previous work.
Depending on your circumstances, you may need tail coverage. In this post, I discuss tail coverage and take you through the process of determining whether you need it  with the help of Sherman’s Law of Malpractice Insurance- If you cancel a claims-made policy, you should get tail coverage.
 Since I do not explore every situation here, you may consider consulting with a qualified professional should you have any questions.
Before we look at Sherman’s Law more carefully, first you need to understand the different type of malpractice insurance policies, so find out what type of a malpractice coverage you have.
If you have an individual occurrence policy, you can stop reading. You are protected from any claims resulting from work you performed while that policy was in effect.
If you have a claims-made policy, you need to understand how this type of policy works.
A claims-made policy covers you when the claim (e.g. lawsuit) is served. Claims-made policies contain a retroactive date, which marks the beginning of the coverage. Let’s look at a quick example:
- Dr. A has an active malpractice policy in 2014, with a retroactive date of January 1, 2014, and performs a procedure that year which results in a bad outcome;
- In 2016, Dr. A is served with a lawsuit resulting from the 2014 procedure in question;
- Dr. A has 2016 claims-made policy which will provide coverage since the claim was submitted in 2016,
For the physician whose claims-made policy is cancelled, there is a potential issue as illustrated below:
- Dr. A has an active malpractice policy in 2014 and performs a procedure that year which results in a bad outcome;
- In 2015, Dr. A cancels the policy (due to retiring or changing jobs) and does not buy tail coverage;
- In 2016, Dr. A is served with a lawsuit resulting from the procedure in 2014.
In this case, without a 2016 claims-made policy, the doctor would not be covered.