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A Good Question Deserves a Good Answer
By Gary McCammon, AAPA Insurance Services
Adapted from AAPA News, January 30, 2004
AAPA Insurance Services recently received the following inquiry from a PA:
“...I have currently been in a practice with a solo practitioner for a year and a half, and am leaving the state... He decided to tell me today that after I leave he wants me to pay half of the cost of the tail coverage. We have not spoken any further details about the coverage and the cost...I have been in the profession for five years and have had three other jobs, all of which covered me appropriately and none of them asked me to split a tail coverage cost when I left... The relationship otherwise has been friendly and I have never been reprimanded or not supported in any of my clinical decisions. Can you help me?”
This is a fairly typical inquiry. So typical that I think my answer to this PA would be of benefit to a lot of other PAs, especially before they find themselves in this situation.
Usually, the employer picks up all costs of malpractice insurance, most often by adding the PA to the physician’s or clinic’s policy. However, we recommend that PAs carry individual insurance policies, separate from the employer’s, and obtain the employer’s agreement to reimburse for the cost. This arrangement should be addressed in your written employment agreement. In the absence of a written agreement, PAs find themselves in the position of limited leverage when leaving the practice to get the employers to purchase tail coverage when individual policies are “claims-made.”
However, if you have been covered on your employer’s policy, rather than an individual policy issued in your name, and it is claims-made coverage, it would be unusual that the employer would have to purchase a tail specifically for you. Normally, the employer could choose to replace you on the policy with a new employee and continue the policy. Then, both you and the new employee would be covered as long as the employer continues to maintain the claims-made policy. If that policy terminates at some point and is not replaced by continuous coverage through a new policy, the employer should buy tail coverage for the entire practice (including your interests) at that time. If this would be the case, you would need to verify annually that the employer is maintaining continuous coverage and thereby covering your tail exposure until if and when tail coverage is purchased.
It is possible that your employer’s coverage specifically schedules your name on the policy and, therefore, your employer must individually purchase tail coverage for you to protect your personal interests. If this is the case, then you would need an “endorsement” or rider to the policy that specifically grants you tail coverage. That document would be titled “extended reporting period endorsement” or similar title. You will want a copy of this as evidence of your coverage.
To answer your main question, it is unusual that an employer would ask an employee to split the cost or otherwise imply (assuming you do not contribute to the cost) that it is permissible for an employee to leave the practice and not have any coverage at all for lawsuits brought after termination of employment.
To boil this down to a few rules of thumb for future reference (Plan A):
1. Ask your employer to agree to reimburse you for your own malpractice policy, as well as indemnifying and holding you harmless for any liability incurred by you in the scope of your employment. Make it part of your employment agreement.
However, if your employer insists that you be covered under the employer’s policy (Plan B):
1. Incorporate into your employment agreement that the employer assumes the obligation for providing your malpractice insurance, as well as indemnifying and holding you harmless for any liability incurred by you in the scope of your employment. Specify that it should be coverage for limits of liability of at least $1,000,000 per occurrence and $3,000,000 aggregate.
2. If claims-made, specify in the agreement that the employer will maintain continuous coverage on your behalf after termination of your employment or will purchase tail coverage on your behalf in lieu of continuous coverage. Also specify that the employer will provide evidence of this insurance to you annually.
3. If the employer will not provide $1,000,000/ $3,000,000 limits, it should be at least as high as the supervising physician’s limits.
4. Specify that failure to maintain adequate insurance does not relieve the employer of any obligation to indemnify and hold you harmless for any liabilities you incur.
Most importantly, you should seek advice from a licensed attorney with experience in employment law and the healthcare industry in structuring this and the other provisions of your employment agreement.
From the above, you can see that this is a complicated issue. Any suggestions I have given in this article should not be considered legal advice. You need to retain an attorney for that. However, please feel free to call us with any general questions at 877/356-2272, ext. 5029, between 8:00 a.m. and 5:00 p.m. CST.
Last Revised: 12/20/07
