What is E&O tail coverage?

Medical Malpractice or Errors and Omissions coverage (“E&O”) is a type of liability insurance which covers a specific risk, Professional Malpractice, Licensing Board Actions and certain other governmental investigations.Usually, the Declarations Page of an E&O policy will declare that coverage is being provided in two limits of liability, one which is“per person” and a second larger limit per “occurrence.”

But, for coverage to exist, two things must be true, which may differ from a general business liability policy which covers anything form slip and falls in the lobby to a failure to maintain the premises in good order. (General business policies exclude professional errors and omissions from coverage.)

First, the incident giving rise to the claim must occur during the term of coverage. Meaning, while the policy is in force. Second, the “claims made” clause of the policy requires that the insurance company must be notified of a claim, while the policy is in effect.

In other words, to satisfy the second element, you can’t switch jobs, or buy a new policy at a lower rate, and expect the old policy to cover you for claims that arose during the term of the old policy, but which were not made while the policy was in force.

This is why practitioners must understand “tail coverage.”When you are offered a renewal of the old policy, the premium always goes up, because: (a) insurance companies are evil and (b) the length of time in which the coverage is in force expands from one year to the next.

You will often be tempted by a lower premium if you switch companies each year. This is because the new company and the old company are washing their hands of liability for occurrences which happened under the old policy.

Tail coverage is designed to bridge this gap in coverage.

How long do you need it?It depends. In states like Texas, the statute of limitations is two years, but may begin to run from or the date of “discovery” of an error or omission which caused damage.

However, if the patient is a child the statute of limitations may be tolled until the child is 18 years old.

When these premiums become too large to make sense, this is also the point where you would be wise to consult an asset protection attorney about Trusts and Estate planning that can add additional layers of protection from any judgment.

Because the trust must be funded before liability is known, meaning, the longer the assets are held in trust, the safer they are, it could be said that E&O insurance covers the immediate future, and a Trust might provide protection in the long-term.

Martin Merritt is a health lawyer and health care litigator at Martin Merritt PLLC, as well as past president of the Texas Health Lawyers Association and past chairman of the Dallas Bar Association Health Law Section. He can be reached at Martin@martinmerritt.com.