Limit of Liability / Aggregate Limit
This is the maximum amount a carrier will pay for all claims that occurred and were reported during a given policy period. Therefore, if your policy limits are $1M / $3M, you have up to $1M per claim, and up to a $3M limit or aggregate for all claims in that policy period.
Retroactive (Prior Acts) Coverage
With a claims-made policy, this coverage provides insurance for claims arising from incidents that occurred while insured on a previous claims-made policy. With retroactive coverage, your new policy covers claims that may arise from when you were with your prior carrier. With such coverage, purchase of a tail is not necessary when switching carriers.
With a claims-made policy, if a physician decides to stop practicing medicine, or switch to an occurrence policy form, they are required to purchase an extended reporting endorsement know as a tail or tail coverage. Since a claims-made policy responds when a claim is made, if you no longer have an active policy, you would be liable for any claims that are presented today. This is true for all incidences that happened for the entirety of when you previously had a claims-made policy. Therefore, the tail coverage provides you with permanent protection for those previous years of exposure up until your retroactive date. Most carriers will offer free tail provisions if physicians meet certain criteria, such as retirement, years with a carrier, death, or permanent disability.
Gap in your Insurance / Gap in Coverage
In a claims-made policy, after the policy period has ended and is not renewed, a physician needs to purchase an extended reporting endorsement. This is also known as a “tail". If the physician moves to another carrier, a tail does not have to be purchased if the new carrier offers prior acts or “nose” coverage. If a tail is not purchased or a new carrier does not offer prior acts coverage, then the physician is considered to have a “gap in coverage”.
This is a problem because:
- The physician would be liable for any claims that arise during the gap in coverage.
- A new carrier may refuse to provide new coverage if you have a previous gap.
- Some states will revoke your medical license.