The July-August 2020 edition of CDS Review, a publication of the Chicago Dental Society, featured an article by Mike Terrell, national program director for Cincinnati’s dentist, veterinarian and optometrist programs. His article describes the differences between occurrence and claims-made insurance coverages and the benefits of each type. This article was republished with the permission of the Chicago Dental Society.
Trust Your Instincts
Some people think that if they tell you often enough that the animals pictured above are cows, you may start believing it. But you know better! As the saying goes, “If it walks like a duck, looks like a duck and quacks like a duck, then it is a duck.”
Use Common Sense To Understand Your Insurance Coverage Options
Confusion often exists about whether a claims-made professional liability policy is as effective as – or even better than – an occurrence professional liability policy. But no matter how many times someone suggests to you that these two types of insurance policies are similar, be confident in your knowledge that, just like cows and ducks, these two coverages are very different.
Know The Differences
In some professions, claims-made is the only type of form available. But for dentists, an occurrence form is also available in most states for most specialties, which allows you the opportunity to choose.
Which Coverage Is Right For Me?
I often speak to dental societies and association conventions and ask attendees if they were practicing dentistry in the 1980s. Those who raise their hands remember when the insurance industry experienced a liability crisis, where many insurers that provided medical liability coverage increased premiums and forced policyholders to convert to claims-made policies. This was an attempt to limit exposure, evaluate risks annually, amend coverage options and increase premiums by charging for tail coverage. While claims-made forms offer protections now, just as they did in the 1980s, the coverage may not fully meet your needs.
While the differences between occurrence and claims-made forms may not be as obvious as those between cows and ducks, they’re equally significant. Your independent agent can talk to you about your unique circumstances including the kind of procedures you perform, your experience and your current coverage.
You’ll want to compare terms, conditions, exclusions and consent to settle wording between the carriers your agent recommends. Understanding the basic differences between your coverage options will better prepare you for that conversation and ultimately, the right decision for you.
The terms and conditions cannot be changed retroactively. If your insurance company changes its stance on providing coverage for a particular procedure, the exclusion only applies going forward; the exclusion cannot apply to procedures you’ve already performed. For example, if a certain root canal filler you’ve used for years is suddenly deemed harmful, a new exclusion for claims involving that filler could not be applied to prior years. You would have coverage for the patients you’ve used it for in the past.
Regardless of when a claim is submitted, you’ll have consistent coverage. Coverage is triggered when the work is performed. As long as your policy was in force at the time you performed the work, you’re protected up to your policy limits.
Transferring your coverage to another carrier is easier. Coverage is provided for procedures performed during the policy period, regardless of when the claim is made. No tail coverage is needed.
Cancellation at retirement is simple. Instead of purchasing costly endorsements, you simply cancel your policy. Covered claims submitted after you stop practicing are still eligible. Usually, more limits of liability are available than those offered for claims-made coverage. For example, your policy provides a $1 million occurrence limit with a $3 million annual aggregate limit. If five claims are reported in one year from work performed in five different policy years, with occurrence coverage you would have $5 million of limits available. With a claims-made policy with the same limits, you would have $3 million of aggregate limits available. In this scenario, the occurrence form provides an additional $2 million limit of liability.
In the event of a claim, the limits of liability that were in effect at the time you performed your work apply. Even if you have higher limits now, that higher amount is not available to pay covered claims that occurred under prior limits.
Occurrence coverage can vary in cost between carriers and is often perceived as more expensive than claims made when compared within the same carrier. This perception could prevent you from seeking affordable occurrence coverage, so ask your independent agent to compare coverages and services across the carriers they represent.
Coverage is typically less expensive than the occurrence form within the first three years of coverage.
However, if you request a retroactive date that is further back into your professional history, the premium will increase.
The policy limits you have in force at the time a claim is made are the limits that apply.
Insurance companies can change the terms and conditions year to year. Unlike occurrence policies, annual changes to claims-made policies may apply retroactively to the point at which you began coverage, so you could be subject to new exclusions at renewal that apply retroactively.
Claims-made forms typically offer lower total limits of coverage. If several claims from different years are reported within the same year, there may be fewer limits available to pay claims.
When you retire, cancel your policy or transfer your policy to another carrier or an occurrence form, you may need to buy an extended reporting period endorsement. While some carriers offer this protection at no additional cost if you meet certain requirements, those terms may also change upon annual renewal. If you purchase this endorsement to protect yourself from claims that have not yet been filed, it typically costs between 100 – 300% of your annual premium.
When a claims-made policy premium reaches maturation, usually between 3-5 years from coverage inception, you’ll need to purchase additional coverage to move to an occurrence form or to retire. You may have to purchase either an extended reporting period endorsement or a prior acts endorsement to transition without gaps in coverage.
This article was republished with the permission of the Chicago Dental Society.