May 2019 Volume LIV Number 3


Professional Liability: All Policies Are Not Created Equal

May 2013 Volume XLVIX Number 3


Mary Taylor, RPLU Financial Services Associate Treloar & Heisel, Inc.


Many of our clients dream of what they will do after making a living in dentistry. Some dream of leaving private practice to become a mentor faculty member. Some want to follow their passions with volunteer organizations to improve their communities. Others just want to sell their practice and move to a remote island somewhere. Whatever your dreams may be, would you ever imagine that your malpractice insurance could become a significant hurdle to reaching those dreams?


Malpractice insurance is an integral part of a dental specialists insurance portfolio, and its important to remember that all policies are not created equal. One of the most impactful differences between policies is the policy form: Occurrence or Claims-Made. The technical difference between the two is when the coverage is triggered, but the real impact to the dentists coverage can be a significant factor to consider when deciding which company and policy will provide the best protection.


Heres a quick overview of the differences between the two policies.


Occurrence Policy – Coverage is triggered based upon when the dental treatment occurred, regardless of when the claim is filed. For example, if a claim is filed in 2013 based on services rendered in 2010, the 2010 policy would respond.


Claims-Made Policy Coverage is triggered based on when the claim is filed. If a claim is filed in 2013 based upon services rendered in 2010, the 2013 policy responds because the claim was filed in 2013.


Prior to the 1980s the occurrence policy was the primary form of malpractice insurance offered. When loss payments and expenses spiked over a short period of time in the late 1970s and early 1980sseveral malpractice insurance companies either went bankrupt or left the market. The insurance industry created claims-made policies as a less risky option for the companies. Today, some companies will offer their insureds a choice while others will only offer claims-made policies. Its important that you understand this distinction before making decisions on your malpractice insurance.

Which is better?


Insurance professionals are often asked which the "better" policy form is, but the answer will depend on the dentists individual situation.


An occurrence policy is an excellent choice for a dentist with any uncertainty in their career path. If a dentist with an occurrence policy chooses to change practice locations, become a faculty member, join a hospital, sell his practice and move to that dream remote island, or make any other significant career change, the occurrence policy will ensure that coverage remains intact for all dentistry performed during the policy period, as coverage is based upon when services are rendered with no additional tail purchase required.


Conversely, a dentist with claims-made coverage must rely on future policies to cover their prior dental treatment, as coverage is based on when the claim is filed, not when the treatment occurred. If a claims-made policy is cancelled for any reason prior to death, disability, or retirement, or the insured dentist moves to another state where the carrier may not cover or is a different risk level, the dentist may have to purchase an extended reporting endorsement ("tail") to avoid a lapse in coverage. The cost of tail coverage is usually significant. This is where many dentists experience the financial implications of choosing a claims-made policy.


A significant difference between policy forms that is often overlooked is the accumulation of limits. Because an occurrence policy is triggered based upon when the dental treatment occurred, the policies provide a separate set of limits for every year in practice. Conversely, a claims-made policy is triggered based upon when the claim is filed. This means that at any given time, only the limits of the current claims-made policy (or tail) are available to respond to a claim. This difference in limits can be significant if a dentist finds himself with multiple claims that are filed in the same year covering multiple policy periods.


Consider a dentist who becomes victim to an aggressive plaintiff attorney. As soon as news of alleged malpractice, drug or alcohol addiction, or any other wrongdoing breaks, the aggressive plaintifattorney hit the streets, gathering up as many of this dentists patients as possible. Before the dentist knows it, multiple lawsuits from multiple patients land on his desk, all likely naming him in the lawsuit for a similar reason. In this situation, the dentist will be in a much better position if he had an occurrence policy versus claims-made. With an occurrence policy he would have multiple policies that might respond to the claims, as he saw the patients over many years. With a claimsmade policy, since all claims were filed in the same year, only the current active policy is available to respond. Depending on the number and severity of claims, this could put his policy limits at risk.


Price of Occurrence and Claims-Made


The price of an occurrence and mature claims-made policy are very similar. However, a claims-made policy is often significantly less expensive during the first few years of practice. This is because a claims-made policy is triggered based on when the claim is filed.

There is usually a lag between the time of treatment and when a claim is filed, so the risk of a malpractice lawsuit is significantly lower athe beginning of a dentists career. As the exposure to risk grows, the claims-made premium will step up in cost until it is "mature" around year five. Remember that if a dentist must cancel his claims-made policy and purchase tail coverage, the cost savings from the beginning of the policy can be quickly eliminated.


Changing Your Policy


Many dentists that began their career with a claims-made policy realize later that an occurrence policy is a better choice for them. Some make this decision to avoid purchasing an expensive tail or to benefit from the accumulation of limits. Regardless of why the decision is made, there are ways to transition your policy from claimsmade to occurrence. We suggest reviewing your policy and situation with your insurance advisor to decide on which option is right for you.


It is important to recognize the implications of each malpractice insurance policy form. All policies are not created equal, and when considering issues such as tail coverage, accumulation of limits, and certainty of coverage, we suggest that every dental specialist review his own policy to ensure he holds the best policy form for his situation.


For more information on your insurance planning needs, contact Treloar and Heisel, Inc at (800) 345-6040 or