Claims-Made Vs. Occurrence Coverage

Claims-Made or Occurrence Coverage? A quick overview of the difference and picking the right one for you.

Professional liability insurance, or as it is also known, medical malpractice insurance, provides coverage through two different policy types: occurrence and claims-made. The insurance terminology for this is referred to as a policy form.  

Your NSO professional liability insurance uses the occurrence form.* Which form you have determines when malpractice claims are covered—and not covered. This becomes important should a competitor attempt to switch you to a claims-made form, as you could experience a gap in protection. 
 

Occurrence Policy Form 

Occurrence policies offer coverage for claims that occur while the policy is active.  Even if the policy has expired or been canceled, if the incident occurred while the policy was in force, coverage is available. 

For example, you purchase an occurrence policy on January 1, 2024 and end coverage December 31, 2025. If a medical malpractice claim occurs anytime during the three years the policy is active, you are covered.   

With an occurrence policy, it does not matter when the claim is reported. It could be reported when the policy is active, or after the policy expires. If a patient is injured on July 10, 2024, but the claim is not reported until May 15, 2026, the occurrence policy still provides coverage.  

As long as the policy is in force at the time the alleged injury took place, coverage is offered under the occurrence policy. As some health conditions may take years to manifest themselves and the occurrence policy provides protection ad infinitum, this can be an important policy feature. 
 

Claims-Made Policy Form 

Claims-made policies offer coverage for claims that occur and are reported while the policy is in force. Once the policy expires, coverage expires. 

As in our example above, you purchase a claims-made policy on January 1, 2024, and stop coverage on December 31, 2025. If a medical malpractice claim occurs and is reported anytime during the three years the policy is active, coverage is offered.  

The difference in the policy forms becomes critical if a claim occurs on July 10, 2024 but is not reported until May 15, 2026. Since the claims-made policy has now expired, there would be no coverage. 
 

Claims-Made: Extended Reporting Period Coverage 

When a claims-made policy is cancelled it is possible to purchase an Extended Reporting Period endorsement, or ‘tail coverage.’ 

Tail coverage extends the time alleged incidents may be reported on a claims-made policy. A tail offers coverage for incidents that happen while the claims-made policy is effective but are reported after the policy has expired.  

Depending on the insurance company, if you meet certain requirements tail coverage may be offered for free. If the requirements have not been met, the claims-made policy may come with the option to purchase tail coverage for a specified period, such as 1, 3 or 5 years, or an unlimited amount of time. 


Claims-Made: Prior Acts Coverage 

Prior acts coverage is another important feature of a claims-made policy. It relates to claims that occurred before the inception of a claims-made policy. This concept becomes important when switching claims-made policies. 

To help protect against a lapse in coverage, when switching insurance companies consider the option of purchasing tail coverage on your old insurance policy or purchasing prior acts coverage from your new insurer. 


Claims-Made: Step Rating 

Considering the added complexity that is inherent with the claims-made policy, you may be asking yourself, why would anyone purchase a claims-made policy? The answer, quite simply, is the price. 

Premiums are lower during the first few years of a claims-made policy. This is due to something called ‘step rating.’ Over the first several years of the claims-made policy you receive a decreasing discount. At the end of the step-rating period, the claims-made policy rate levels off and becomes comparable to the occurrence policy rate.  
 

Which Policy Form is Better? 

The coverage afforded by both policy forms is identical. The difference comes down to when you can report a claim. The occurrence form gives you more flexibility.  Whether the claim is reported when you are practicing, or after you retire and cancel the policy, you receive coverage. 

The occurrence form is the original contract created by the insurance industry. The claims-made form was devised later in response to long-tail claims such as asbestosis that can take 20-30 years to manifest itself. It protects the insurance company from claims reported decades after the policy has expired. 

With the NSO occurrence policy, you have the broadest policy form available on the market today. If a competitor offers you a claims-made policy at a lower price, be careful. Speak to an NSO representative at 1-800-247-1500. They’ll explain how to avoid a gap in coverage that could leave you vulnerable. 
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* Both occurrence and claims-made policies are available in all states, with the exception of  nurse practitioners in Florida, where only the claims-made policy form is available.  
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#Claim #Coverage #License Protection #Malpractice #Safety


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Frequently Asked Questions

You have questions. We have answers. (It's why we're here.)



What kinds of activities might trigger a disciplinary action by a licensing board or regulatory agency? 


The fact is anyone can file a complaint against you with the state board for any reason—even your own employer—and it doesn’t have to be solely connected to your professional duties. All complaints need to be taken seriously, no matter how trivial or unfounded they may appear. 


How does a shared limit policy work?


A shared limit policy is issued in the name of your professional business or company. The policy provides professional liability insurance coverage for the business entity named on the certificate of insurance and any of the employees of the business entity, provided they are a ratable profession within our program. Coverage is also provided for locum tenens professionals with whom the business entity has contracted for services the locum tenens performs for the business entity.

The business, and all eligible employees and sub-contractors you regularly employ, will be considered when determining your practice’s premium calculation and share the same coverage limits you select for the business.


We have a shared limit policy. Are employees covered if they practice outside our office?


The policy covers your employees outside the office as long as they are performing covered professional services on behalf of your business.

If your employees are moonlighting, either for pay or as a volunteer, they should carry an individual professional liability insurance policy to cover those services. Otherwise, they might not be covered for claims that arise out of these activities.



There are plenty more where those came from.


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