Lifeline Liability
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, so it is important to understand both types so you can assess the cost benefit. Occurrence-based coverage This type of coverage differs from claims-made coverage in how the timeframe of covered claims is determined. Not all liability claims are filed immediately following an incident. Sometimes there is a delay between when incidents occur and when the alleged injuries appear and when the claim is filed. A liability policy that is written with extended reporting periods means that it covers you for claims that occur during the period the policy is in force along with any claims that are filed in the future for occurrences while the policy was in force. While at first glance this appears to be very robust coverage, there are some important considerations.
• Policy cost. Occurrence policies are more costly because dentists pay upfront for the “tail” or extended reporting coverage to protect against of 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.
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