"Be Prepared" - What is Prior Acts Coverage?

June 1, 2022   |   Healthcare Professional

Be Prepared”, the nationally renowned motto of the Boy Scouts of America can be applied to all of us. What is the meaning of the motto “Be Prepared”? The definition is that a scout must prepare himself by previous thinking out and practicing how to act on any accident or emergency so that he is never taken by surprise. Doesn’t this hold true to those who treat patients in the medical community? We are challenged in our didactic studies and then perform rotations in numerous specialties to familiarize ourselves with patients, their presentation, their diseases and the numerous treatment plans to help relieve their suffering and pain. Unfortunately, there are some situations that require a clinician to move from their comfort level in their general practice and to be “floated” in a hospital situation to floors and specialties that we are not totally prepared to enter. Short staffing during the Covid pandemic added to this poor utilization of professional employees who had no choice; it was sink or float.

In a previous blog post, we discussed an ICU nurse who made a medical error, as all professionals likely have done. But her institution, which carried her malpractice insurance, focused primarily, expectedly, on protecting the hospital, then the physicians and lastly, nurses, PAs, NPs and other specialty providers. Because of this, the hospital protected itself as a system and this nurse was the designated victim. Her golden parachute could have been a personal liability insurance policy where she would become the primary focus of protection.

Calling the death of 75-year-old patient Charlene Murphey a “terrible, terrible mistake,” a Tennessee judge sentenced former nurse RaDonda Vaught, RN, to three years of supervised probation on May 13. From a place of personal accountability and commitment to system improvement, RaDonda Vaught’s conduct in the aftermath of this tragic event has been exemplary. She told what she knew, as soon as she knew it, to any stakeholder, for any purpose in hopes that understanding her actions, state of mind, priorities, omissions, and flaws could help her patient or any other. Much of what we have learned comes from the painful, candid narrative of RaDonda Vaught, at no small consequence to herself. She is the nurse the patient safety community has longed for, and indeed has spent two-and-half decades nurturing.

Professionals are confronted with purchasing two types of insurance: Claims Made or Occurrence. Yet, there is another type of insurance that is available that can protect the insured from having to purchase a “tail.” This type of insurance is called Prior Acts, which is an insurance policy that covers claims made for insurable events that occurred prior to a policy’s purchase. This simplifies insurance matters for holders of liability insurance who change insurance providers.

Not sure this applies to you? We were recently contacted through a social media group for PAs and NPs and asked to speak with a young professional who left her former employer. While switching jobs, she discovered that she would be required to pay the tail and was at a point where she lacked information from the former company. This could happen to anyone, which is why it is important to ask for your certificate of insurance annually, and ensure you are named an additional insured, and have an option for tail coverage.

Leonardo da Vinci stated that “Learning never exhausts the mind” and, therefore, we need to both anticipate the perplexing problems that can be on our paths and focus on how to prevent falling over a crevice. You also have an option for a Convertible Policy, but it is essentially a Claims Made policy that converts to Occurrence after three years, and the insured is eligible for a free tail all the way back to their retroactive date at the time of conversion. The cost equals the Occurrence premium for the same exposure and the healthcare practitioner must keep the first year of Occurrence (after conversion) active. The only other stipulation is that the insured must be claim-free during the convertible period in order for coverage to convert and for the free tail to be issued.

In an article in Investopedia dated 7/8/21, Julie Kagan spoke on prior acts:

Prior acts coverage typically gets sold in the context of liability insurance, which protects entities from suffering legal repercussions for certain activities they undertake that inadvertently cause injury or damage to others. For example, malpractice insurance may cover legal costs and damage in the event a patient sued a medical practitioner for the provision of negligent care. Since these claims may take time to adjudicate, a business could easily end up filing a claim for an action it committed one year or more prior.

Insurance companies offering prior acts coverage usually provide a retroactive coverage date, or a date in the past which is at some point prior to the first date of the coverage period. With prior acts coverage, the insurance company will then cover any claims filed for events that occurred after the retroactive date up until the point of active coverage (even if those events took place when the business or entity involved was covered by an insurance policy from another provider). The retroactive coverage date defines the limitations of prior acts coverage.

From my knowledge as a PA for forty-seven years, only a few companies exist that offer this type of coverage and it behooves every practicing PA, NP or nurse to search the companies personally, discover where they can find a convertible insurance and make this important investment in their future. Dennis Waitley, a journalist said: “Happy people plan actions; they don’t plan results.”

For a more complete understanding of this type of insurance and the complexities of prior acts,  learn more from the ECBM blog post by Jeffrey Forbes, Why Professionals Need to Be Careful with Retroactive Dates.

By: Robert M. Blumm, PA, DFAAPA, PA-C Emeritus
CM&F Clinical Advisor

Photo by RF._.studio


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