Consequences Just Ahead

While driving, you see warning signs like “Uneven Road”, “Fallen Rock”, “Bump”, “Dip”, “Yield”, “Give Way”, “Slow Down”, and “Reduce Speed”, alongside speed limit signs. These are warnings with consequences. You have the freedom to choose, but you are not free from the consequences of your choice. When you make a decision, you must accept the outcome. The choices you make today shape your tomorrow.

It has been said: “Consequences are the scarecrows of fools and the beacons of wise men.”

This holds true for your decision regarding the Professional Liability and General Liability policies you purchase.

A quick definition search of the word “consequences” often reveals a negative connotation: effects, fallout, reactions, issues, repercussions, aftereffects, chain reactions, or even a “can of worms.” You may be tempted by a twisted recommendation or a low-priced offer to buy or switch insurance carriers. But remember the two age-old sayings: “It’s time to pay the fiddler” and “It’s time to pay the piper.”

Pro-Tip

Before switching insurance carriers for your Professional Liability insurance or General Liability policy—or purchasing a new policy as a practitioner—verify the coverage details. Policies are not identical.

A Professional Liability policy can be either a Claims-Made policy or an Occurrence policy.

• Occurrence Professional Liability Policy: Think of this as lifetime coverage. The premiums are level, and after you terminate the policy, you are always covered for any incident that occurred while the policy was in place.
• Claims-Made Professional Liability Policy: With this structure, premiums start lower and increase annually, typically leveling out around year seven. These policies are designed for affordability, often catering to new practitioners or those seeking to minimize insurance costs.

Key details of Claims-Made policies:

• Initial premiums can be as low as $55 annually, gradually increasing to around $230 or higher by the seventh year.
• While these policies offer affordable entry points, they require a “Tail” or extended reporting period (ERP) premium payment to cover claims that occurred during the policy period but were not reported until after termination. The “Tail” premium can be as much as 300% of a single year’s premium.

The Consequences

When you terminate a Claims-Made policy—whether switching to another carrier or leaving the profession—you are at risk of claims from incidents that occurred during the policy period but are reported after termination. Without purchasing a “Tail” cover, you forfeit coverage for these claims. In essence, failing to “Pay the Piper” for those initial low premiums leaves you exposed.

For more details on the differences between Claims-Made and Occurrence policies, refer to the December 2019 Tip of the Month.

We recognize that the social work profession is a noble one, built on service, integrity, and clinical expertise. At times, it can also be stressful and dangerous. The nation is grateful for your work—and so are we! Thank You!

This is why Preferra accommodates all practitioners by offering both Professional Liability policy structures: Claims-Made and Occurrence. Additionally, Preferra charges no policy fees, no administrative fees, and has no history of price increases. We offer no deductibles and pay dividends to our policyholders because you own Preferra.

Pro-Tip

There is a trade-off between low premiums and coverage duration

• Claims history shows that subpoenas for medical records, depositions, and trial testimony can occur at any time.
• Licensing Board complaints often arise months after a therapy session.
• Lawsuits are typically filed 3 to 8 months later, and in cases involving a death, it may take a year or more.

In the United States, the risk of legacy claims is increasing. Over 30 states have revised or are revising their statute of limitation laws to allow lawsuits indefinitely after therapy in certain cases. If your “Tail” coverage expires, no protection will be available for older legacy claims. For complete lifetime coverage, it makes sense to buy an Occurrence Professional Liability policy.

While many practitioners opt for Claims-Made policies for cost control, purchasing a “Tail” cover upon policy termination is essential. Based on insurance claims experience, most claims arise within five years, but factors like extended state statutes of limitations or treating minors can prolong exposure.

With an Occurrence policy, coverage is guaranteed for any incident that occurred during the policy period, regardless of when the claim is reported. As long as the incident occurred while the policy was active, coverage remains in effect without additional fees or exceptions.