Decoding Professional Liability Insurance Terms

Have you ever tried to navigate an unfamiliar city with a GPS programmed to give directions in a language you haven’t learned? It’s a jarring experience, one with high potential for confusion and frustration.

Insurance jargon isn’t — and isn’t expected to be — your native tongue. While you don’t need to know it all, just a few plain-speak explainers can make it easier to understand your coverage options. The experts at TDIC are always happy to answer your questions and provide more details specific to your situation and coverage needs.

Here are some aspects of professional liability policies and how claims are handled that may differ between TDIC and other insurers.

Timing of claim coverage

When it comes to professional liability, insurance companies set the conditions for when and how they will respond to claims. The insurance industry has two different ways to determine whether a filed claim is eligible for coverage based on the timeframe of the occurrence and when the claim is filed. These are known as:

• Occurrence-based coverage
• Claims-made and reported coverage

The only difference between these two policy types is what triggers the coverage. However, the type of claim coverage utilized by your insurer impacts the cost of your premium. By understanding both types, you can make a better cost-benefit assessment.

• Policy cost. Occurrence policies are more costly because dentists pay upfront for the “tail” or extended reporting coverage to protect against potential liabilities occurring outside of the dates in which the policy is in force.
• Claim limits. When a claim is filed with an occurrence-based policy, the limits of coverage are those that existed in the policy when the claim occurred, not when the claim is filed. This can lead to being underinsured if limits were significantly lower during the time of occurrence or if multiple claims with the same occurrence year are filed at different times.
• Changing carriers can be difficult. Because policyholders pay more money upfront for the extended reporting period of occurrence-based policies, they often feel “stuck” with that policy carrier, even if service levels or claim limits are subpar. And because claims that occur before the policy is in force are not covered, it can be risky to transition to this type of policy.

Claims-made and reported coverage

TDIC offers claims-made and reported Professional Liability insurance. This means that your TDIC policy provides coverage for:

• Claim incidents that occur during the time the policy is in force.
• Claims that are reported while the policy is in force.

Note that your coverage remains in force when you pay premiums for your new policy and any subsequent renewals. Each year the policy is continuously renewed, your coverage period for claims is extended.

There are some key value and protection advantages to this coverage when compared to occurrence-based coverage.

• Lower premiums. Since the insurance carrier does not need to anticipate the risk of future claims made outside of the policy dates, there is often significant premium savings for claims-made and reported coverage.
• Other cost savings. Limits for claims are those in force at the time the claim is filed, which ensures you benefit as liability limits increase in response to inflation and the rising cost of practice and

There is no need for dentists to prepay for the cost of possible future claims at every renewal. However, when you select a policy with claims-made and reported coverage, you can opt to maintain protection for delayed claims if you want to change carriers or have a career transition. That’s when tail coverage becomes relevant.

Tail coverage, aka "extended reporting endorsement"

Tail coverage is an extended reporting period endorsement offered by TDIC to provide protection for claims filed after your claims-made policy is canceled or expires. Tail coverage ensures continuity of professional liability coverage despite future changes to your practice, location or policy.

Tail coverage does not extend the length of time the policy is in force or require ongoing liability coverage. It simply allows for coverage of claims that are filed after the policy’s expiration date, so long as the incident took place while the policy was in force.

The advantage of tail coverage is that it’s an added endorsement to your policy that you don’t need to pay for until you actually need it. The times you need to consider adding tail coverage to your policy are when you:

• Switch insurance carriers.
• Enter a postgraduate dental program and want to switch from personal coverage to your program’s liability
• Become disabled to the point where you can no longer practice.
• Retire (TDIC offers customers of three or more years complimentary tail coverage when they retire).

Consent to settle

TDIC will never settle a professional liability claim without your written consent. A consent to settle clause in TDIC’s policies requires explicit approval from you, the insured, prior to settling a claim.

Policyholders are entitled to have a clear picture of all the available options for claim resolution and be able to select the one that feels right to them. Some policyholders weigh the option of pursuing a case through litigation versus the time and expense of being away from their practice. In some instances, the settlement demand is within a range that is considered acceptable to the policyholder and TDIC representatives, given all the variables in a particular case.

Many policyholders express concern that settling a professional liability claim is equivalent to stating they are at fault for an occurrence. TDIC’s standard release language contains wording that specifically states the settlement is not an admission of liability. Settlement is sometimes the easiest and most cost- effective solution, as it avoids lengthy and expensive litigation.

If you need assistance interpreting or understanding any aspect of your policy, please speak to a helpful TDIC representative. The chart below offers another perspective for viewing occurence-based, claims-made and tail coverage.

Occurrence-based coverage
Covers claims reported for occurrences during the period the policy is in force and claims for occurrences during the policy which are reported after the policy ends. Possibility of being underinsured if limits were significantly lower during the time of occurrence or if multiple claims with the same occurrence year are filed at different times.

PROS:

✔ Claims covered that occur during the time the policy is in force

✔ Coverage for claims that are filed after policy ends if they occurred during the policy

CONS:
✘ No coverage for claims filed for occurrences prior to the policy

✘ Costly premium because you pay upfront for extended reporting coverage

✘ Limits for claims are those in force at the time of occurrence, not time of report

Claims-made coverage
Covers claims that occur and are reported while the policy is in force. Insured benefits from cost savings of lower premiums. Risk of being underinsured is lower since claim limits are those in force when the claim is filed.

PROS:
✔ Claim incidents covered that occur during the time the policy is in force

✔ Claims covered that are reported while the policy is in force

✔ Premium cost is lower since it does not include a tail endorsement

✔ Limits for claims are those in force at the time the claim is filed

CONS:

✘ No coverage for claims that are filed after the policy ends

Tail coverage

Extended reporting period endorsement can be added to a claims-made policy to include claims filed after policy ends. Ideal for dentists facing transitions like changing practices, pursuing graduate studies, retiring.
 

PROS:
✔ Coverage for claims that occur during the policy that are filed after the policy expiration

✔ Ensures continuity of liability coverage in case of future changes to your practice, location or policy

✔ You don't pay for it until you need it

✔ TDIC offers policyholders of three or more consecutive years complimentary tail coverage when they retire