Claims-Made vs Occurrence Malpractice and Who Pays for Tail Coverage

An occurrence policy is the simpler of the two forms: the coverage attaches to the incident.

New York's insurance regulation (11 NYCRR 73.1(j)) defines an occurrence policy as one covering liability for injury or damage arising out of incidents, acts or omissions that occurred during the policy period, where the claim may be made during or after the policy period.

The Massachusetts Division of Insurance makes the same point in plain terms: an occurrence policy provides liability coverage for injury or damage that occurs during the policy period, no matter when the claim is made.

That structure removes the departure problem this guide is about.

A patient who sues three years later over treatment delivered while an occurrence policy was in force is still making a claim on that policy.

There is no tail to buy, no extended reporting decision to make, and no coverage gap to argue about when the clinician gives notice.

Which form a practice can buy is a question of what its state's rules and its carrier allow: Wisconsin, for example, requires physicians and certified registered nurse anesthetists to carry primary malpractice insurance and allows it to be written on either an occurrence or a claims-made basis, according to the Wisconsin Office of the Commissioner of Insurance.

What the claims-made option commits you to at the exit is the rest of this page.

A claims-made policy turns the trigger around: what matters is when the claim is made, not when the care happened.

The Massachusetts Division of Insurance explains that a claims-made policy generally provides liability coverage only if a written claim is made — and in many cases reported to the insurer — during the policy period or any applicable extended reporting period.

New York's regulation (11 NYCRR 73.1(a)) defines the form the same way with one addition: the incident must have occurred on or after the policy's retroactive date.

The retroactive date is where hiring meets the policy.

Massachusetts DOI says that when a retroactive date is shown on the policy, any claim made during the policy period will not be covered if the loss occurred before that date.

A clinician you hire mid-career arrives with a coverage history; if the new policy's retroactive date starts on their first day with you, the years they practiced before are outside it unless the policy adds coverage for that earlier work.

New York also locks the date down once set: 11 NYCRR 73.3(b) bars changing the retroactive date during the term of the claims-made relationship and any extended reporting period.

Claims-made forms are not unique to malpractice, so the question does not stop at the professional liability policy.

The employment practices liability policy at the center of Penn Psychiatric Center v. United States Liability Insurance Co. (Pennsylvania Superior Court, 2021) was a claims-made policy covering a one-year period, October 18, 2018 to October 18, 2019.

One policy proves nothing about the market, but it is a reason to check the form on every liability line the practice buys, not only malpractice.

The gap in a claims-made form is closed by two attachments that run in opposite directions.

Tail coverage — regulators call it an extended reporting period, or ERP — attaches to a policy that is ending.

New York (11 NYCRR 73.1(d)) defines extended reporting period coverage as the period specified in the policy during which claims first made after termination of coverage, for injuries during the policy term or after the retroactive date, are treated as made during the policy term.

Massachusetts DOI says an extended reporting period generally allows an insured to make a claim after a claims-made policy expires, and that the tail should be specified in the policy itself.

The Wisconsin Office of the Commissioner of Insurance, in its guidance for the state's Injured Patient and Families Compensation Fund — written for Wisconsin physicians and certified registered nurse anesthetists, which in behavioral health reaches psychiatrists — states the obligation directly: a provider with claims-made coverage must buy a tail policy or extended reporting endorsement to cover claims reported after the claims-made policy has been terminated.

Nose coverage — New York's 11 NYCRR 73.1(c) calls it prior acts coverage — runs the other way, backward over work done before the policy started: coverage for injury or damage that occurs on or after the retroactive date but prior to the effective date of the policy.

When you hire a clinician who spent years at another practice, prior acts coverage on your policy, or a retroactive date carried back on their own, is what reaches the care they delivered before their first day with you.

New York also scripts the mechanics of a claims-made ending.

Under 11 NYCRR 73.3, a 60-day automatic extended reporting period must be provided when coverage ends — 90 days for public entity liability policies — and the insurer must tell the insured in writing within 30 days about that period and the availability and premium of a longer tail.

Under 73.3(f)–(g), insurers must offer a three-year extended reporting period when most claims-made liability coverage ends, but only a one-year period for listed lines that include employment practices liability.

These are New York rules that bind insurers on New York policies: they shape what a departing clinician will be offered, not who pays for it.

That last table cell is the question employers actually face.

The research for this guide found no statute or regulation that decides whether the employer or the departing clinician pays for tail coverage — and not finding a rule is not proof that none exists anywhere, so confirm your state's position with your insurance department or employment counsel.

Plan on it being a contract term all the same: the form of the policy decides that a tail is needed; nothing we found decides who buys it.

Treat it like any other economic term in the offer.

Two interests pull at the answer: whoever sponsors the policy chose its form, and the departing clinician is the one whose coverage history has to close cleanly — either with a tail on that policy or with prior acts coverage on their next one.

The mechanics on both sides are settled by the policy documents; only the payment question is open, and it comes due at the departure.

Deciding it in the employment agreement costs a sentence.

Deciding it during the exit costs a negotiation with someone who is already leaving.

One input to the negotiation is whose policy actually covers the work.

Whether employed clinicians sit under the practice's entity policy or carry their own changes which tail is even in play — malpractice for employed clinicians walks that structure choice.

Match the tail term to the answer: the party responsible for the policy is the natural party to buy the tail on it, and if a clinician carries their own claims-made policy, the agreement should say whether the practice contributes when they leave.

Before negotiating the tail payment from scratch, check what the policy already gives away.

The Massachusetts Division of Insurance says a number of insurers waive the tail premium in full on retirement, death or disability — some only as optional coverage — and that the 100% premium waiver is in many instances contingent on having continuous coverage with the same insurer for a certain number of years, often 3–5 years; some insurers offer discounted retirement tails before that.

New York goes further by regulation.

For claims-made medical malpractice policies covering non-physicians, 11 NYCRR 73.4 requires the insurer to offer an extended reporting period covering an unlimited time period when coverage ends, and to provide it at no additional premium when the insured dies, becomes permanently disabled, or retires permanently and totally from practice at age 65 or older after five or more consecutive years insured on a claims-made basis with the same insurer.

That is a New York rule, and it carries a caveat behavioral health employers should read twice: the regulation speaks to medical malpractice policies as New York insurance law defines them, and whether a given therapist's or counselor's professional liability policy falls under that definition was not verified by this guide's research.

Ask the carrier which part of the New York rules your policy sits under.

The continuity condition is the part that surprises employers.

Free-tail waivers often ride on continuous coverage with the same insurer, which makes a mid-stream carrier change exactly what the condition measures.

So before a tail promise goes into an offer letter or a separation agreement, check it against the carrier's actual waiver terms — especially if the practice has changed carriers while the clinician was covered, and ask what continuity the waiver requires.

Our research found no statute that assigns the tail, so the employment agreement has to.

Put these clauses in front of employment counsel before the next offer goes out.

• Policy form and insureds. State whether the practice's malpractice coverage is occurrence or claims-made, and who the policy insures. If it is claims-made, record the retroactive date and whether prior acts coverage applies.
• Who buys the tail. Name the party who pays for tail coverage when the clinician leaves, and whether that changes with the reason for the departure — voluntary resignation, termination without cause, or cause. Silence leaves the decision to the departure itself, when both sides are least able to make it well.
• Free-tail triggers. Note any death, disability or retirement tail the carrier offers and the continuous-coverage condition attached to it, so the promise in the agreement matches what the policy will actually do.
• Prior work for new hires. Decide who covers a clinician's pre-hire work — prior acts coverage on your policy or a retroactive date carried back on theirs — and write the answer into the offer.
• Other claims-made lines. Ask the same form questions about employment practices liability and any other liability coverage the practice buys. In New York, the required tail offer for employment practices liability is one year, not the three years offered for most other claims-made liability lines — a shorter bridge if that policy ever ends.
• Counsel and carrier confirmation. Have employment counsel review the clause, and get the carrier's tail terms in writing — including which state's rules apply to the policy, since the rules this guide cites are Massachusetts guidance, New York regulations and Wisconsin guidance, not one national rule.

From there, the rest of the staffing side — planning, supervision, credentialing, pay — lives in the behavioral health hiring hub.