New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on October 23, 2002, representing the position of the New York State Insurance Department.

Re: Tail Coverage for Medical Malpractice Insurance

Question Presented:

Does N.Y. Ins. Law § 3436 (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11 Part 73 (1997) (Regulation 121) require a physician to pay for extended reporting period coverage ("tail coverage") for a claims-made medical malpractice insurance policy when the physician retires from private practice for which he originally purchased the medical malpractice policy, but still practices medicine full-time at a hospital?

Conclusion:

Yes, N.Y. Ins. Law § 3436 (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11 Part 73 (1997) (Regulation 121) requires a physician to pay for tail coverage for a claims-made medical malpractice insurance policy when the physician retires from private practice for which he originally purchased the medical malpractice policy, but still practices medicine full-time at a hospital.

Facts:

A physician holds a full-time salaried position at a city hospital since 1988. In 1992, the physician started a part-time private practice in addition to his full-time position at the hospital. The physician purchased medical malpractice insurance for his private practice. Now, more than 10 years later, the physician has retired fully from private practice but still holds the full-time position at the hospital. (The hospital is covered under the umbrella policy of the Health and Hospital Corporation).

The physician’s insurer has given conflicting opinions on whether or not he has to purchase tail coverage or receive it for free.

Analysis:

N.Y. Comp. Codes R. & Regs. tit. 11 Part 73 (1997) (Regulation 121) establishes minimum standards for claims-made insurance policies issued in New York. N.Y. Comp. Codes R. & Regs. tit. 11 § 73.1(a) defines a claims-made policy as "an insurance policy that covers liability for injury or damage that the insured is legally obligated to pay (including injury or damage occurring prior to the effective date of the policy, but subsequent to the retroactive date, if any), arising out of incidents, acts or omissions, as long as the claim is first made during the policy period or any extended reporting period."

Extended reporting period coverage or tail coverage is defined under section 73.1(d) as "coverage for that period of time specified in the policy wherein claims first made after termination of coverage under the policy term, for injury or damage that occurs during the policy term, or that occurs on or after the retroactive date, if any, will be considered made during the policy term."

Therefore, the benefit received from tail coverage is that it extends coverage for claims that are first made after termination of a policy, arising from liabilities incurred back to the agreed-upon retroactive date, for an additional time period. Section 73.3(c)(1) requires that, upon the termination of claims-made liability coverage, "extended reporting period coverage required by this Part must be made available for any claims-made liability coverage provided under the policy."

N.Y. Ins. Law § 3436(b)(1) (McKinney 2000), governs the requirements for free tail coverage, along with Regulation 121. Section 3436(b)(1) provides that:

[I]f the insured has purchased a claims-made policy from an admitted insurer for a period of five or more consecutive years and the insured, after attaining the age of sixty-five or older, retires permanently and totally from the practice of medicine or if the insured has purchased such a policy for a period of ten or more consecutive years, and the insured, after attaining the age of fifty-five or older, retires permanently and totally from the practice of medicine, the insurer shall, without charging an additional premium therefor at the time of, or subsequent to, such retirement, also cover all occurrences between the inception date of the first such consecutive policy from such insurer and such retirement date which, subsequent to the termination date, are reported in accordance with statutory and policy requirements. (emphasis added).

N.Y. Comp. Codes R. & Regs. tit. 11 § 73.5(c) states:

Upon termination of coverage, an insurer shall provide the extended reporting period coverage required by subdivision (b) of this section, without charging an additional premium, if, while covered by the policy, the insured:

    1. dies;
    2. becomes permanently disabled and is unable to carry out the practice of medicine; or
    3. retires permanently and totally from the practice of medicine after (i) attaining the age of 65 or older and has been insured with an authorized insurer on a claims-made basis for a period of five or more consecutive years, or (ii) attaining the age of 55 or older and has been insured with an authorized insurer on a claims-made basis for a period of 10 or more consecutive years. (emphasis added).

Concerning this specific inquiry, if the physician wants tail coverage, he would be required to pay for it because he does not meet the above-stated requirement for free tail coverage, since the physician is not permanently and fully retired from the practice of medicine. Because the physician does not fulfill this requirement, it is not necessary to further analyze the other fundamentals of free tail coverage (i.e. age and length of time insured on a claims-made basis). Please be advised that the insurer must offer the tail coverage, but the physician is not required to purchase it.

For further information, you may contact Senior Attorney Meredith S. Kaufer at the New York City Office.