Occurrence or  Claims-Made: which is best?

There is a great deal of confusion in the chiropractic profession about what type of policy to purchase when it comes to malpractice insurance.

There are two types of policies available from most of the programs offering malpractice insurance: Occurrence and Claims-Made.

Which is best? The short answer is simple: CLAIMS MADE.

The full answer gets a bit more complicated since you need to understand the difference between the two policies to make an educated decision on which policy would better suit you. Both types of policy have their advantages, although the claims-made policy is gaining in popularity because it is less expensive and offers specific benefits to doctors. Interestingly, medical doctors have been buying claims-made policies for more than 35 years and their premiums are 20-100 times that of a D.C.

An occurrence policy is a policy that covers you for a specific dollar amount for each individual year. For example, if you carry an Occurrence policy for $100,000/$300,00 in 1998 and a patient files a claim against you in 2003 when you have a $1 million/$3 million policy, the insurance company is liable for no more than a $100,000 for that particular claim.

So, if you are successfully sued for $250,000, you will be personally responsible for the $150,000 beyond your coverage.

However, frequently, years can go by before a patient files a claim. After five years or so, $100,000 might not be enough coverage to cover the entire claim. Despite inflation, rising awards from judges and juries, and the increasing amount of money attorneys are asking for in lawsuits, the insurance company is still only responsible for the limits you carried at the time the injury occurred, not when the claim was made.

Let's take the same example, but this time, let's assume you had a claims-made policy. If you carried a $100,000/$300,000 policy in 1998 and get sued in 2003 when you have a $1 million/$3 million policy, the insurance company is now liable for $1 million dollars for that particular claim.

This is because the claims-made policy covers you for the policy amount you have when the claim is made. This is an advantage for you because every time you increase your policy limits, you are now covered for the higher limits for every year you have carried the claims-made policy. This increased coverage keeps pace with inflation and rising awards.

Companies that sell occurrence policies normally say that one benefit of the occurrence policy is that it covers you no matter when the patient files their claim. In part, this is true -- you will not have to buy separate tail-coverage with an occurrence policy.

Tail-coverage is what covers a doctor from the time they drop their policy (usually after they retire) to the day they pass away. It protects you in case a patient sues after you no longer have malpractice insurance.

Of course, that tail-coverage isn't really "free" with an occurrence policy. The cost is merely figured into the premium. That's why it is normally more expensive to buy an occurrence policy. You can have an occurrence policy for years and drop the policy without having to worry about buying tail-coverage.

Is this a benefit? It depends. If a chiropractor retires after 30-50 years in practice with an occurrence policy, he/she will have paid the cost of tail-coverage several times over.

The claims-made policy is a less expensive policy because it does not include the price of a tail-coverage. A doctor with a claims-made policy is covered for as long as he/she carries the policy.

Most companies have a retirement clause which provide a free "tail" upon retirement. You only need to purchase tail coverage if you retire prior to the age set by the policy.

It's important to remember that you do not have to buy tail coverage every time you switch companies. Prior-acts coverage is the same as tail-coverage (except you receive it for free from the company you are switching to.)

If you switch to a program with prior-acts coverage, you do not have to buy tail-coverage from your old company. The only time you might actually need to purchase tail-coverage is when you stop practicing.