Why Are You Still Buying Occurrence Malpractice Coverage?
In today’s complex healthcare landscape, carrying malpractice insurance isn’t optional—it’s a necessity. A 2017 survey conducted by Medscape revealed that over 50% of 4,000 physicians surveyed had been named in a malpractice lawsuit by a former patient. Even more striking, 87% of those doctors were caught off guard by the legal action. The survey, covering 25 different specialties, paints a sobering picture of how widespread and unexpected malpractice claims can be.
The rising trend of patient lawsuits—often driven by the hope of a quick payout—goes far beyond damaging a medical professional’s reputation. These legal claims can be financially and emotionally taxing. Physicians, physician assistants, and nurses alike are vulnerable and should have individual malpractice coverage. Complicating matters further, many lawsuits stem from incidents that happened five or even six years prior, during which time a provider may have changed employers, altered insurance plans, or even retired.
Even after leaving a position or the profession, healthcare providers can still face legal exposure. The protection they have depends heavily on the type of malpractice policy they had at the time of the incident—and what coverage they maintain today.
Understanding the Two Primary Types of Malpractice Insurance
Malpractice insurance generally comes in two forms: occurrence-based policies and claims-made policies. Each has its own structure, benefits, and limitations.
Occurrence-Based Policies
An occurrence policy offers coverage for any incident that occurred while the policy was active—regardless of when the claim is filed. For instance, if you had an occurrence policy in 2020, you’d be protected for any claims related to treatment provided that year—even if the claim surfaces decades later.
Pros:
- Continuous protection for covered incidents, even after the policy has ended.
- Ideal for those who may switch jobs or retire without worrying about extended coverage.
- Premiums are more stable year over year.
Cons:
- Typically more expensive than claims-made policies.
- Older policies may not reflect current standards of care, possibly reducing coverage in retrospect.
Claims-Made Policies
Claims-made insurance covers only those claims made while the policy is active. If a policy lapses or is canceled, so does the coverage—unless additional tail coverage is purchased to extend protection.
Given that many states now enforce statutes of limitations—usually between two and six years—claims-made policies often provide adequate protection for active professionals.
Pros:
- More affordable—usually up to 50% cheaper than occurrence policies.
- Flexible and scalable: allows for adjusting coverage as a provider’s career progresses.
- Easier to manage financially, especially early in a provider’s career.
Cons:
- Requires tail coverage to protect against post-employment claims.
- Vulnerability to lawsuits if there is a lapse in coverage during job transitions or retirement.
A Brief History of Malpractice Insurance
Malpractice insurance evolved significantly during the 1960s, when lawsuits against physicians became more common. Initially, occurrence-based coverage was the only option. The emergence of claims-made policies—at substantially lower costs—shifted the market. The introduction of state-specific statutes of limitations further supported the transition, as coverage no longer needed to extend indefinitely in most cases.
Statutes of Limitations and Their Role
Each state governs its own statute of limitations for malpractice suits, typically ranging from two to six years. However, exceptions exist—especially for minors, whose injuries or consequences may not surface until much later. These rules shape how long physicians must maintain protection after an incident.
Tailoring Coverage Throughout Your Career
As physicians progress in their careers, the volume and complexity of patient cases tend to grow, before eventually tapering off as they specialize or reduce their practice. Claims-made insurance allows for annual adjustments to match evolving risk levels, while occurrence-based policies do not offer this flexibility.
Choosing the Right Malpractice Policy
Ultimately, the choice between occurrence and claims-made policies depends on your career stage, financial situation, and long-term plans. Occurrence policies offer lasting peace of mind, while claims-made policies provide more affordable, adaptable coverage.
What matters most is ensuring that you’re covered. One well-timed lawsuit—whether justified or not—can derail your career and result in significant financial loss. Having robust malpractice insurance is a crucial safeguard for every healthcare professional. NOW Insurance provides claims-made professional liability policies, with the option to add on an occurrence-based general liability policy. Get a quote in under 3 minutes from our simple online application.
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