Every physician and health care provider needs to have medical malpractice insurance. An average of 20,000 medical malpractice lawsuits are filed each year and by the time physicians reach age 55, about half have had at least one malpractice suit. A study by the AMA found that some specialties are at particularly high risk with the majority of general surgeons, OB-GYNs, radiologists, emergency medicine physicians, family physicians, and orthopedic surgeons being sued at some point in their careers.
There are two types of malpractice insurance: occurrence and claims made, with important differences between the two:
- Occurrence. This type of insurance policy covers the time period during which the malpractice event occurred. Because it provides lifetime coverage, there is no need to purchase a tail policy.
- Claims made. This type of insurance policy covers the time period during which the suit was filed in court. This is usually months or years after the malpractice event occurred. There is usually a retroactive date for when that coverage starts – generally the retroactive date is the date that the physician first purchased that particular claims made policy. For this reason, a tail policy must be purchased when changing insurance companies or changing jobs to a new employer. A tail policy must also be purchased when a physician with claims made insurance retires.
To understand the difference, take an example of a physician employed by City Memorial Hospital and covered by occurrence malpractice insurance. The physician retires on December 31, 2024. In July 2025, a patient that the physician cared for in 2024 files a malpractice suit. The occurrence malpractice insurance covers the physician since the malpractice event occurred in 2024, when the physician was employed and paying occurrence malpractice insurance premiums.
On the other hand, if the physician had a claims made policy when working at City Memorial Hospital in 2024, that claims made policy would not cover the physician since the malpractice claim was made in 2025, after the physician retired. Instead, the physician’s tail policy would cover lawsuit.
In the past, occurrence policies were the most common. Occurrence insurance is simple and covers the physician for life, even if a lawsuit is filed after the physician changes jobs or retires. Because occurrence insurance provides lifetime coverage, it is more expensive than claims made insurance. As more and more physicians become employed by hospitals or corporations owned by private equity groups, occurrence policies have become less frequent since employers prefer to purchase the less expensive claims made policies. Those employers can then transfer the responsibility and cost of a tail coverage policy on to the physicians if they change jobs or otherwise resign from the hospital.
In theory, the total lifetime cost of occurrence insurance should be the same as the total lifetime cost of claims made plus tail insurance. After all, a physician is equally likely to be sued whether they have occurrence or claims made policies. So, why are claims made policies becoming so much more common?
Occurrence vs claims made considerations
Most physicians do not have a choice between occurrence policies and claims made policies – that decision will be made by the hospital or corporation employing the physician. Physicians in solo practice or in a physician-owned group practice do have a choice between these insurance policies but fewer and fewer physicians are now self-employed. Here are some of the considerations that impact the two types of medical malpractice insurance:
- Statute of limitations and statute of repose. The length of time of the statute of limitations and statute of repose can impact the likelihood of a future lawsuit and impact the cost of a tail insurance policy. Each state has different laws governing the statute of limitations for medical malpractice lawsuits. For example, in Ohio, there is a 1-year statute of limitations from the time that the malpractice event was discovered and an additional 4-year statute of repose from the time that the malpractice event occurred. As an example, let’s say an Ohio surgeon leaves a sponge in the abdomen during a surgery in 2020 and the patient first discovers this when he develops an abdominal abscess in January 2023. The patient has until January 2024 to file a malpractice suit because of the 1-year statute of limitations. Now let’s say that the same patient doesn’t develop the abdominal abscess and discover the retained sponge until 2025. The patient cannot file a malpractice lawsuit because it is now beyond the 4-year statute of repose. In contrast, the statute of limitations in Florida is 2 years with a 4-year statute of repose. In New York, there is a 2.5 year statute of limitations with no additional statute of repose for most medical malpractice lawsuits but for retained foreign bodies (like a retained sponge), the statute of limitations is 1-year from discovery with a 10-year statute of repose. Thus in New York, a physician who performs invasive procedures (for example, a surgeon) could be sued 10-years after retirement whereas a physician who does not perform invasive procedures (for example, an allergist), could only be sued 2.5 years after retirement. The statute of limitations for malpractice involving minors is different and in most states does not start until the child’s 18th birthday meaning that a malpractice suit involving an event that occurred to a child could be filed up to age 19 in Ohio or age 20.5 in New York.
- Regional difference in the cost of malpractice insurance. The same insurance policy will have different costs in every state in the U.S. The biggest impact on cost is state-specific laws regarding medical malpractice. Those states that have passed malpractice reform laws have lower cost malpractice premiums than those states with malpractice laws that favor plaintiffs. In addition, the citizens of some states are more litigious than others based on social factors and state-specific legal precedents. As an example, a general surgeon practicing in Los Angeles, California will pay an average of $42,000 per year for malpractice insurance but a general surgeon practicing Miami, Florida will pay an average of $244,000 per year. With a tail policy costing 2-3 times the annual cost of a claims made policy, the general surgeon would pay about $105,000 for tail coverage in Los Angeles but could pay as much as $610,000 for tail coverage in Miami.
- The claims made retroactive date. It is crucial to understand the fine print of the malpractice insurance policy. Claims made policies will include a retroactive date – that is, the date that coverage commences. Malpractice events that occurred prior to the retroactive date are not covered. In most policies, the retroactive date will be the day that the physician first bought that particular insurance policy. That means that if a physician changes jobs or changes insurance companies, the physician would need to purchase a tail policy for any suits that later get filed for an event that occurred during their previous job or previous claims made policy since those events would be prior to the retroactive date. Some claims made policies will not have a retroactive date and (in theory) will cover any malpractice lawsuit from past employment that is filed during time that the claims made policy is active. The retroactive date will determine whether a physician needs to purchase a tail policy when changing insurance companies or when changing employers.
- The tail policy retroactive date. Tail policies are often purchased from the same insurance company that held the physician’s most recent claims made policy. The retroactive date of the tail policy is usually the date that the claims made policy first went into effect. When purchasing a tail policy it is critically important to be sure that these dates match up to be certain that there is no gap in coverage. A physician who changes jobs or insurance companies frequently might need to hold several different tail policies – one for each of several different previous claims made policies. It is necessary for the physician to have sufficient tail coverage with a retroactive date at least as far back as the state’s statute of limitation and statute of repose.
- Occurrence policies are more expensive than claims made policies. Claims made policies will not cover malpractice events that happened prior to the retroactive date and will not cover claims that are filed after the policy ends. This requires purchase of separate tail policy when a physician has a claims made policy. As a result, the annual premium for a claims made policy alone is considerably less expensive than the annual premium for an occurrence policy. That difference is made up for in the future, when the physician has to purchase a separate tail policy.
- Claims made premiums increase in the first years. Because most malpractice lawsuits are not filed for months or years after the actual event occurred, claims made policies are less expensive in the first year of the policy. The annual cost of claims made insurance premiums will then rise each year before leveling off at about 5 years into the policy. On the other hand, occurrence policies will not change appreciably from one year to the next. This can make the cost of malpractice insurance seem deceptively low when first purchasing a claims made policy compared to an occurrence policy. It is important to look beyond the cost of the first year of the claims made policy to fully appreciate the long-term cost.
- Will your employer purchase a tail for you? Many hospitals and corporate employers with claims made malpractice insurance policies will purchase a tail for physicians who leave the practice. Sometimes, this is only for physicians retiring after a certain number of years of employment. Sometimes, this is for any physician leaving the practice but only after a minimum number of years of employment. It is critical for physicians to understand the fine print about tail coverage in order to know whether the hospital or corporate employer will pay for your tail policy or whether you will have to. Also, if the hospital closes, or the corporation employing the physician goes out of business, the physician may have to purchase a tail policy even though the original employment contract promised that the employer would provide tail coverage. This happened to emergency medicine physicians employed by American Physician Partners (APP) and NES Health – both companies ceased operations, leaving tail coverage unexpectedly up to the physicians who worked for the companies. Additionally, some employment contracts will specify that the hospital or corporate employer will not purchase a tail policy for physicians who are terminated “for cause”, meaning that if the physician is fired, that physician will have to purchase their own tail policy.
- Beware of coverage gaps. If a physician with claims made insurance changes jobs with a new employer and there is a gap of a few weeks or months between the two employers, that gap in time needs to be covered. If the new employer offers to purchase a tail policy, the physician needs to be sure that the tail policy is in effect starting from the date the physician stopped working for the old employer. Otherwise the physician may be responsible for purchasing insurance coverage in case a claim is filed during the gap between employers.
- You may need more than one tail. Because the retroactive date on most tail policies is the date that the claims made policy first went into effect, a physician changing employment or changing insurance companies frequently may need to purchase a tail policy for each of several claims made policies. Again, careful attention to the fine print of the tail policy is essential as is awareness of the specific state’s statute of limitations and statute of repose.
- “Nose policies” are the opposite of tail policies. A nose policy (aka, “prior acts coverage”) is sometimes included with a new claims made policy. With a nose policy, any malpractice event occurring prior to the retroactive date of the new claims made policy is covered by the nose policy. Having a nose policy with a new claims made policy will eliminate having to purchase a tail policy with the previous claims made policy. If the nose policy has its own retroactive date, be sure that it corresponds with the statute of limitations and statue of repose of the state. “Full prior acts” policies do not have a retroactive date and cover any new claims, regardless of how long ago the malpractice event occurred.
The bottom line is that the complexities of claims made insurance policies often necessitate having an attorney review new employment contracts and insurance policy contracts to be sure that physicians do not find themselves unexpectedly not covered by malpractice insurance.
Hospitals prefer to buy claims made malpractice insurance for their doctors
Most physicians are now employed by either a hospital or a private equity-owned corporation. A minority work in physician-owned group practices. Solo private practices are largely a thing of the past. Hospitals and corporations will usually provide malpractice insurance for their employed physicians. This allows for a unified defense in event of a malpractice suit filed against both the hospital and a doctor thus preventing the finger pointing that occurs when the doctor and the hospital are represented by different insurance companies and different attorneys in a malpractice suit. Furthermore, offering to provide malpractice insurance is an important fringe benefit that hospitals use in recruiting physicians in order to remain competitive with other hospitals recruiting from the same pool of physicians.
As a physician, I would much prefer that the hospital that employs me buys occurrence malpractice insurance. But, there are several reasons why hospitals (and private equity-owned corporations) prefer to buy claims made insurance rather than occurrence insurance for their physicians.
- The premiums are lower in the first years of employment. As discussed above, malpractice claims are filed with the court months or years after the malpractice event occurs. As a result, claims made insurance is relatively inexpensive for the first year of employment and gradually increases every year until leveling off at about 5 years. Occurrence insurance costs the same per year no matter how many years the physician has been employed. A recent study found that most newly trained physicians change jobs within 2 years of their first employment after residency. Knowing this, hospitals can save a lot of money in malpractice premiums if they buy the less expensive claims made insurance for new physicians, knowing that many of them will only work at the hospital for 2 years or less.
- They may require the physician to purchase a tail policy. Some hospitals will include a tail policy with the initial employment contract but not all will. If the physician has to purchase the tail policy, this transfers a large part of the cost of malpractice insurance to the physician.
- The hospital can use a tail policy as an a work incentive. Some hospitals will agree to pay for a tail policy but only after a physician has been vested by working at the hospital for some minimum number of years, for example, 5 years. If the doctor resigns before that vestment period, then the doctor must purchase the tail policy. This can serve as a deterrent for physicians to leave the hospital practice after too short of a time, thus reducing the cost to the hospital of recruiting replacements for those physicians.
- The hospital can avoid claims histories on their physician malpractice insurance by dumping high-risk physicians. Let’s say that the hospital’s quality department identifies a physician who has not been practicing good quality medicine. Maybe the physician has a lot of patient complaints, or is found to not be using standard of care practices, or is found to be drinking on the job. These are often “for cause” reasons that the hospital can terminate the physician’s employment contract. If a tail policy is contractually not provided by the hospital for physicians terminated for cause, then the doctor will have to buy his or her own tail coverage when fired. Any future malpractice claims would then appear on the physician’s insurance record and not the hospital’s insurance record. This potentially could help the hospital avoid a costly increase in its physician malpractice insurance premiums by keeping any future malpractice claims against the physician off of the hospital’s claim history. Having a vestment period before the hospital will buy a tail policy is another way for the hospital to avoid paying for tail policies for bad physicians – if the hospital identifies a physician as being a malpractice risk because of poor performance, the hospital can terminate that physician prior to the vestment period, thus requiring the physician to buy the tail policy.
- It keeps the hospital from having to pay more for physician malpractice insurance than the other hospitals. Frequently, hospitals will purchase nose insurance as a recruitment incentive when hiring new physicians. If the last hospital that the physician worked at had claims made insurance, then the new hospital will often buy a nose policy but if the last hospital that the physician worked at had occurrence insurance, then the new hospital does not need to spend the money on a nose policy. No hospital wants to be the only hospital offering occurrence insurance since not only will the hospital be paying more in annual premiums, but they still may need to offer to also buy nose policies when recruiting new physicians who had claims made policies at their previous employer. When one hospital starts using claims made insurance policies for its doctors, other hospitals will follow suit since no hospital wants to be the only one offering occurrence insurance.
Caveat emptor
When it comes to malpractice insurance, the physician is ultimately the buyer and must be aware of all the nuances of that specific malpractice insurance policy. Occurrence policies are great and I would personally prefer occurrence insurance because of its simplicity – it covers you forever for the period of time that you were practicing and paying your malpractice insurance premiums. But claims made policies are much more complex and fraught with potential pitfalls that can result in the physician being unexpectedly uncovered and thus personally responsible for attorney costs and plaintiff awards in the event of a lawsuit. Specifically, physicians should:
- Understand the retroactive date of any new claims made policy.
- Know and understand the statute of limitations and the statute of repose of every state you practice in.
- When changing employers, try to negotiate for the new employer to purchase a tail policy for the previous employment. Alternatively, see if the employer will include a nose policy provision to the new claims made policy (without a retractive date).
- When changing employers, be sure that the gap period between employers is covered by a tail policy or a nose policy.
- Negotiate with your employer for tail coverage with your initial employment contract, before you start working and thus still have negotiation power.
- If the employer has agreed to purchase a tail policy for you if you leave for a new employer, be sure to understand any terms for coverage, such as if the employer terminates you versus you leaving on your own accord. Also, whether you need to be vested (work for the employer for a certain number of years) to be eligible for tail coverage.
- If the employer has agreed to purchase a tail policy you when you retire, be sure to know how many years you must work before you are vested, that is, how many years you must work for the employer to be eligible for a retirement tail policy.
- Most residency programs either provide occurrence insurance or provide claims made along with tail coverage. However, if a resident moonlights outside of their hospital, the resident needs to check the malpractice insurance policy provided by the moonlighting employer because tail coverage may be necessary for the moonlighting malpractice insurance.
The bottom line…
In theory, a claims made policy coupled with a tail policy should be just as good as an occurrence policy. Moreover, over the course of a physician’s career, the cost between these two options should even out to be the same. However, the nuances of the physician employment contract including the retroactive date, whether the physician or the employer pays the tail, and the requirements that the physician must meet in order for the employer to pay for the tail are critical. Without careful attention to these details, physicians could unexpectedly face gaps in time when they are uninsured. This could result in a physician having to personally pay hundreds of thousands or even millions of dollars in the event of a malpractice lawsuit filed during a coverage gap period.
February 1, 2026
