Claims Made vs Occurence Policies
There is probably nothing more confusing for chiropractors in regards to purchasing malpractice insurance than the comparison and contrast between a Claims Made and Occurrence policy. So lets take a couple of minutes and walk through them.
First up – COST. Occurrence policies are generally more expensive than claims made policies because you are charged for tail coverage (included in the premium) every year with the purchase of an annual occurrence policy. This is one reason its more expensive. With a claims made policy, tail coverage is a just one time charge when coverage is no longer needed.
ChiroFutures offers FREE tail coverage if you become permanently disabled or you have been insured with us for 3 or more years and are at least 55 years of age.
A claims made policy is more appropriate for insuring a lifetime profession like chiropractic. The reason being is that claims made policies mature with a doctor throughout their career. For example, if a DC had an occurrence policy and had an incident that occurred 10 years ago but was reported today, will that occurrence policy have the proper coverage to address the claim given how policy coverage changes over time?
If the standard limit of liability today is 1M/3M but in 10 years, increases to 2M/4M due to the rising costs of attorney fees, adverse litigation, etc… then the ability to report an incident to your current (up-to-date) claims made policy is more favorable than reporting an incident to an occurrence policy you had ten years prior.
Keep in mind that a company writing an occurrence policy could go out of business. In fact, they do go out of business and they have. Some reading this who have been in practice awhile will recall that there are several companies that wrote occurrence policies in the chiropractic profession that are no longer in that business. Some just recently experienced this as two companies stopped writing chiropractors.
I should add that if a DC moves from one claims made carrier to another without any lapse, the new carrier will pick up prior acts coverage (retro-active date), so it’s not necessary to purchase a tail from the current carrier.
If a DC needs to purchase a tail (Extended Reporting Period) for whatever reason, it is a onetime charge of about 120% of the annual policy premium for a mature Claims Made policy. This tail or extended reporting period will extend for the rest of the DC’s life.
A claims made policy offers coverage for an event that occurs on or after the retroactive date but was first made against an insured during the policy period. The claims made policy is inexpensive at first and gradually increases over a period of time (4 years) to a “mature” premium.
Claims made policies offer flexibility - meaning that changes can be made to your current claims made policy and then they will apply to all your years of coverage back to your retroactive date. For example: If you increase your limits of liability at renewal on a claims made policy, the new limit of liability can be applied to all the years back to your retroactive date. On an occurrence policy, prior policies cannot be changed.
If you still decide to get an occurrence policy, make sure you retain copies of ALL of your policies throughout the years and be aware of the consequences if one of those insurance carriers goes out of business - who would you report the claim to?
As always I look forward to your feedback, questions and comments.
Matthew McCoy DC, MPH
CEO & Co-Founder
ChiroFutures Malpractice Program
