In the high-stakes world of medicine, where even seemingly minor oversights or errors in judgment can result in life-altering consequences, lawsuits from patients constitute a threat. About one-third of physicians in the U.S. have been sued at some point in their careers.
Medical malpractice coverage, a specific form of professional liability insurance offered to medical professionals, offers crucial protection for physicians’ finances, careers, and reputations. However, physicians may inadvertently create gaps in their coverage when they change positions or switch insurance carriers.
In a previous blog, we discussed how tail insurance helps to protect physicians from medical malpractice claims occurring before their current claims-made policy began. Today, we take a look at prior acts coverage, which effectively adjusts the incept date of an insurance policy to better ensure coverage.
This blog post will help you understand prior acts coverage and determine if it suits your medical practice.
Read on for answers to these 4 questions:
Prior acts coverage, also known as nose coverage or retroactive coverage, is an optional policy feature sold by medical malpractice insurers. It helps physicians avoid gaps in their medical malpractice insurance by covering incidents that occurred before the new policy was in effect, up to a certain date. People can refer to this date in the past as a retroactive inception or starting date.
Nose coverage is sometimes confused with tail coverage, also known as an extended reporting period (ERP). Tail coverage serves a similar purpose, but it works in the opposite direction: It allows physicians to report claims after a policy has expired, so long as the incident occurred when the policy was still active.
Nose and tail coverage options exist because medical malpractice insurance involves long-tail risks. The situation is unlike your auto or homeowners insurance, under which the insured event and the claim will likely occur closely together in time. With medical malpractice insurance, patients may file claims many years after an alleged malpractice event occurs. The time limit tends to vary by situation and the location of your practice.
By the time a lawsuit is eventually filed, the physician may have already switched to a different insurance policy. If the physician did not purchase prior acts coverage from their new insurance provider (or tail coverage from their previous provider), they may find themselves with an unexpected gap in coverage, exposing their finances and practice to significant risk.
Medical malpractice prior acts coverage helps protect physicians from a wide variety of incidents that occurred prior to their policy. Some of the more common reasons patients file medical malpractice claims against their physicians include:
Coverage may vary from policy to policy. Review the full policy for details about its prior acts coverage.
Prior acts coverage is not a separate policy, but a feature that can be attached to a medical malpractice policy. When you switch insurance carriers, you may have the option to buy prior acts coverage from the new insurer.
With prior acts coverage in effect, the new insurer agrees to cover claims made on insurable events that occurred before the policy’s purchase, up to a certain retroactive inception date.
Coverage triggers determine when a medical malpractice policy will respond to a claim. Under a claims-made policy with prior acts coverage, the trigger occurs when the claim is first made against the physician.
Some policies have an ‘incident demand’ trigger, meaning the insurer deems the claim made when a physician proactively reports an issue likely to become a claim. Review your policy terms for details.
Prior acts coverage has a retroactive starting date earlier than the date the policy took effect. The retroactive date is the earliest date an alleged malpractice event can occur and still be covered by the policy.
For example, a physician might buy a new policy that takes effect Jan. 1, 2025 but offers retroactive coverage to Jan. 1, 2020. Their policy would respond to a claim filed in 2025 for an event in 2020. However, if the event occurred in 2019 — before the retroactive date — the policy would not respond.
Some insurers offer what’s known as full prior acts coverage. It doesn’t include a retroactive date. Instead, it covers claims arising from alleged negligence acts that took place at any time in the past.
Prior acts coverage may be subject to certain limitations or exclusions, which will be outlined in the policy terms and conditions. For example, if the policy specifies a retroactive date, it will not cover claims arising from incidents before it.
The typical medical malpractice insurance exclusions still apply in policies that feature prior acts coverage. Common exclusions include sexual misconduct and intentional acts. Review your policy terms for details about prior actions that are not covered.
Understanding the differences between prior acts coverage and claims-made policies is crucial for physicians and other medical professionals seeking to protect themselves from medical malpractice claims.
Most medical malpractice policies are written on a claims-made basis. A claims-made policy offers coverage if the policy is in force both when the incident took place and when the claim was made.
A standard claims-made policy is written in one-year terms. However, that does not mean the incident and the claim need to occur in the same calendar year. When a policy is continually renewed, the insurer typically maintains the first date of coverage as the retroactive date. That ensures physicians have coverage for incidents that occurred in a prior policy year, so long as they have renewed the same policy.
In contrast, prior acts coverage allows physicians to transfer their existing policy’s retroactive date to a new medical malpractice policy. The new insurer agrees to cover claims that arise from insurable events that occurred before the policy’s purchase, so long as the event occurred on or after the retroactive date set out in the policy terms.
As with any insurance product, selecting prior acts coverage has both pros and cons. To decide whether or not you need prior acts coverage medical malpractice insurance, carefully weigh these pros and cons.
In any given year, about 7% of physicians will make a job change. Prior acts coverage allows physicians to pursue new career opportunities, such as joining a new practice, without feeling restricted by their medical malpractice insurance. With prior acts coverage, physicians can make transitions while maintaining protection for their actions in previous roles.
Physicians switching employers or insurance carriers can choose between either nose or tail coverage to ensure they maintain continuous medical malpractice insurance. Tail coverage costs an average of 2.5 times your annual medical malpractice premium. Nose coverage may be more cost-effective when switching carriers.
Continuous medical malpractice coverage is crucial since physicians and other medical practitioners may face claims at unpredictable times, often long after the care was provided. Securing prior acts coverage allows physicians to switch to a new insurance carrier without creating a gap in coverage.
Underwriting is the process insurance companies use to evaluate the risk of offering medical malpractice insurance, determine if a physician will be approved, and if so, how much the coverage will cost. Insurers may decline to sell nose coverage to physicians and medical professionals who do not meet their eligibility criteria.
Some employee contracts specifically require the purchase of tail coverage when leaving employment. Requesting tail coverage is a risk management strategy to avoid any future issues related to a physician’s past work. Review your former employer’s contract to confirm if purchasing prior acts coverage is permitted.
These hypothetical examples illustrate how prior acts coverage medical malpractice insurance may benefit physicians in various situations.
Dr. Jones is a family physician with a successful solo practice. She has maintained claims-made coverage with Company A since opening her practice on Jan. 1, 2010. In 2024, she switched to a new claims-made policy offered by Company B. Her new insurer provides full prior acts coverage, meaning it will offer protection from insurable incidents at any time in the past.
Soon after Dr. Jones switches insurance providers, a former patient files a lawsuit relating to an incident in 2021. The patient claims Dr. Jones missed the early signs of the patient’s cancer, resulting in significant treatment delays.
At the time of the alleged incident in 2021, Dr. Jones was covered by Company A, but because the policy has since expired, Company A will not respond. Fortunately, her new policy with Company B will respond since it features full prior acts coverage.
Dr. Jones files a claim with Company B. Even though the incident occurred before Dr. Jones purchased her policy, her new insurer provides a rigorous defense and successfully defends the doctor against the allegations.
Dr. Lee is a dermatologist with a solo practice who has maintained continuous claims-made coverage. To serve more patients, he decides to merge with another solo practice to create a dermatology group.
Both dermatologists need coverage for claims that may arise as a result of their actions in solo practice. The company that insures the new group practice agrees to offer full prior acts coverage for both doctors.
Some time after closing his solo practice, Dr. Lee is sued by a former patient. The patient alleges that Dr. Lee did not obtain informed consent before performing an elective laser procedure which left her with burns.
Dr. Lee files a claim with the new insurance company that’s covering his group practice. Even though the incident occurred before he purchased the policy, the insurer successfully defends him against the allegations, protecting his new practice and his reputation.
Prior acts coverage allows physicians and other medical professionals to change insurers while maintaining continuous medical malpractice insurance. With prior acts coverage in place, the new policy will offer coverage for claims that arise because of incidents occurring before the new policy's effective date.
To determine if prior acts coverage is right for your practice, carefully consider the type of insurance policy you have, the nature of your previous work, and your budget for medical malpractice insurance.
Indigo is a medical malpractice insurance company that leverages the power of artificial intelligence to improve on the traditional insurance process. Now, physicians can receive medical malpractice insurance with the robust features they need, including prior acts coverage, at a price that’s customized to their practice.
Find out if Indigo’s robust medical malpractice coverage can support your practice.
