SD16 - Medical Malpractice Insurance Tail Coverage

  • Published: 1990
  • Author: State Corporation Commission and Bureau of Insurance
  • Enabling Authority: Senate Joint Resolution 211 (Regular Session, 1989)

Executive Summary:
The State Corporation Commission's Bureau of Insurance was requested by the 1989 Session of the General Assembly to study the reasonableness of medical malpractice insurance tail coverage and to determine whether it should be more stringently regulated or possibly prohibited. The findings of this study are summarized below:

1. Rates for tail coverage are subject to prior filing and actuarial review by the Commission pursuant to § 38.2-1912 of the Code of Virginia.

2. Forms for tail coverage are subject to review by the Commission under § 38.2-317. This section requires forms to be filed at least 30 days prior to their effective date. The Commission may disapprove a form if it does not comply with the provisions of § 38.2-317.

3. Tail coverage extends the time to report claims resulting from incidents that occurred when a claims-made policy was in force. It is designed to eliminate gaps in coverage. The Bureau of Insurance requires tail coverage to be offered by the insurer of the expiring policy when (i) a claims-made policy is cancelled or non-renewed, (ii) the retroactive date is advanced, or (iii) a policy is renewed other than on a claims-made policy form. The insured must be given at least 30 days after termination to purchase tail coverage and the expiring policy's aggregate limits of liability must be reinstated at the time of purchase. The insured must also be offered "unlimited" tail coverage. This means that the extension of the reporting period cannot be limited in its duration. These requirements exceed the requirements of many other states.

4. The premiums charged for tail coverage vary from company to company, and some companies waive the additional premium for tail coverage if the insured retires, dies, or becomes totally and permanently disabled. Each company specifies the conditions which must be met in each of these situations.

5. A review of one company's rates on file with the Bureau of Insurance shows that over a 10-year, 15-year, or 20-year period a physician would pay less for coverage under a claims-made policy (including the purchase of tail coverage) than under an occurrence policy.

Based on these findings, the State Corporation Commission's Bureau of Insurance concludes that tail coverage for medical malpractice insurance is reasonable and that it should not be more stringently regulated nor should it be prohibited.