Unclear employment contract details can lead to costly disputes.
Updated April 2026
One of the most common—and often misunderstood—questions physicians face when changing jobs is:
Who is responsible for paying for tail coverage?
The answer varies, and in most cases, your employment contract ultimately determines responsibility.
What is Tail Coverage?
If your malpractice insurance is written on a claims-made basis, coverage is triggered when a claim is reported, not when the care was provided.
This means that when your policy ends—whether due to a job change or switching carriers—you are no longer covered for claims reported after that date, even if the care occurred while the policy was active.
Tail coverage (also known as an Extended Reporting Endorsement) allows you to report claims in the future for services you provided in the past (dating back to your retroactive date). Without it, you may have a gap in coverage.
Who Actually Pays for Tail Coverage?
There is no universal rule, but most physician employment agreements fall into one of the following categories:
Physician Pays
In many employment arrangements, the physician is responsible for purchasing tail coverage upon departure.
The cost is typically 150% to 250% of the final annual premium.
Example:
If your annual premium is $20,000, tail coverage may cost between $30,000 and $50,000.
Employer Pays
Some employers agree to cover the cost of tail coverage, often under specific conditions such as:
- Completion of a defined employment term
This is one of the most valuable provisions a physician can negotiate in an employment contract.
Shared Responsibility
In some cases, the cost of tail coverage may be shared between the physician and the employer, or paid by the employer only under certain circumstances (such as termination without cause).
A common structure might look like this:
- Employed 4+ years → Employer pays 100%
- 3–4 years → Physician pays 25%
- 2–3 years → Physician pays 50%
- 1–2 years → Physician pays 75%
- Less than 1 year or termination for cause → Physician pays 100
A Real-World Example (Why This Matters)
I have worked with a medical group where a physician left the practice, and the responsibility for tail coverage was not clearly defined in the employment agreement.
What seemed like a straightforward issue quickly turned into a dispute—and ultimately ended up in court.
Both parties believed the other was responsible, and because the contract language was not clearly defined, it resulted in significant legal expenses, delays, and stress for everyone involved.
This situation is more common than most physicians realize—and it is entirely preventable with clear contract language upfront.
Key Contract Provisions to Review
Before signing an employment agreement—or before leaving a current position—it is important to understand:
- Who is responsible for tail coverage
- Under what circumstances tail is required
- Whether prior acts coverage is available through a future employer
- Any A.M. Best rating requirements for the carrier providing tail coverage
- Required coverage limits for the tail policy
These provisions can have a significant financial impact, often ranging from tens of thousands to over $100,000 depending on specialty and exposure.
A Common (and Costly) Misunderstanding
Many physicians assume that because their employer provides malpractice coverage, they are fully protected.
That is only true while the policy is active.
If you leave a position with a claims-made policy and do not secure tail coverage (or applicable prior acts coverage), you may be left without protection for prior services.
Final Thoughts
Tail coverage is more than just an insurance detail—it is a financial and contractual decision that should be addressed well before any transition.
Understanding who is responsible for this cost—and ensuring that responsibility is clearly defined in the employment contract—can help avoid unexpected expenses, disputes, and potential legal issues.
Need Help Reviewing Your Coverage?
If you would like a second opinion on your current malpractice policy or employment agreement, I am happy to review it and walk through your options.
Steve Sopyla, CPCU
Sopyla & Associates, LLC
Specializing in Medical Professional Liability Insurance Since 1990
Note: I am not an attorney and do not provide legal advice. I’m happy to review insurance-related provisions and coordinate with your attorney as needed.