In order to ensure that your potential new insurance policy will actually provide the coverage you need, it’s important to understand the specifics of the policy. A variety of limits and provisions may exist with any new policy—variations that may limit your coverage in ways you might not expect. By not knowing what kinds of limits or restrictions there may be, you leave yourself vulnerable to a lawsuit, despite the efforts you made to secure coverage and limit your risks.
Along with understanding individual and shared limits, for example, it’s also important you educate yourself about occurrence versus claims-made policies. For providers who cover health and wellness professionals, this aspect of coverage is critical to understand. If you aren’t aware of the differences, you could be on your way to a disaster should a lawsuit get filed against you at the “wrong” time.
The Occurrence Policy
As the name may suggest, if you have an occurrence form policy and an incident—or an occurrence—takes place, as long as your policy is active at the time of the incident, you’ll have coverage. It won’t matter if the claim itself is filed sometime after the incident takes place. With occurrence policies, the key factor is not when a lawsuit is filed, but rather whether or not your insurance policy was active when the incident in question occurred.
Here’s an example: You have an occurrence form policy that expired on June 30, and you didn’t renew with your provider. Unexpectedly, a client reported shoulder pain and bruising from a massage therapy session you gave on May 30, when you were still covered by your occurrence policy. For whatever reason, the client decides to wait until July 30 to file a claim against you for injuries. You call your insurance provider to report this new claim and learn that you are, in fact, covered—even though your policy expired the previous month!
The Trouble with a Claims-Made Policy
When you have a claims-madepolicy, the policy must be active at the time the claim is filed in order for the insurance provider to cover you. With this type of policy, you run the risk of being completely unprotected by your insurance when a claim is filed against you after your claims-made policy expired. Unlike the occurrence policy, you will not be covered by a claims-made policy even if the incident in question took place while the policy was active. The timing of the lawsuit matters for claims-made policies, not the date of the incident in question.
Here’s an example: You have a claims-made policy and your coverage expired on June 30. A client files a lawsuit for injuries she incurred during a May 30 acupressure session, during which time you were insured with your claims-made policy. Your client doesn’t file the claim until July 30, a full month after your claims-made policy expired. You call your insurance provider to report the claim, only to find out that you have no coverage available, since the claim was filed after the expiration date of your claims-made policy.
The Claims-Made Policy with Tail Coverage
To avoid the main pitfall of a claims-made policy, you may also look into what is known as tail coverage. Also known as extended reporting period (ERP) coverage, tail coverage literally extends the reporting period for a claims-made policy — allowing the insured member to receive coverage for claims that are filed after their claims-made policy expires. Those who select claims-made policies may opt for additional tail coverage, which may protect them if a lawsuit is filed after the date the claims-made policy ends, much like an occurrence policy would.
Here’s an example: You have a claims-made policy that expired on June 30, but you wisely decided to add tail coverage to your policy. A client files a claim on July 30, claiming injury during a session with you dated May 30. You call your insurance provider to report the claim and learn that you’re still covered—even though you reported the claim after your claims-made policy expired!
MMIP Quick Tip: Occurrence policies are concerned with when the incident occurs. Claims-made policies are concerned with when the claim is filed. Be sure that you know what kind of policy you’re getting when you enroll with an insurance provider. When you go through all the work of getting insured, you want to make sure your insurance will work for you.