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Tail Insurance canceled one year after employment termination North Carolina

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  • Tail Insurance canceled one year after employment termination North Carolina

    Can a previous employer in NC retroactively cancel malpractice tail coverage insurance retroactively on an employee 11 months after an employee has left a firm?

    My friend worked as a physician's assistant for a medical office, and was originally covered (2001) by a company purchased "event based" malpractice insurance policy. There was no employment contract, but it was known that the company paid for this plan for all direct medical providers. If any malpractice claim was brought against the individual employees, the insurance carrier would be responsible for coverage, even if that employee had left the practice.

    In 2007, the company changed to a "claims based" policy. By this, once an employee leaves employment, he is no longer covered by the policy unless the company chooses to pay the premium. Otherwise, should someone bring suit against the employee after that employee has left the practice for something they did while employed by that practice, then the employee is NOT covered by the company's policy. To be covered, the employee or employer must purchase a separate "tail policy".

    The problem here, my friend was never informed of this change. She was aware that nobody leaving the company previously ever had to purchase a "tail policy". She was quite surprised to receive a letter from the insurance company this week explaining that she was no longer covered by the previous company's policy, and to be covered against malpractice for the time period of 2007 through 2009, she needed purchase a tail policy for $4000, otherwise, she was totally exposed to risk.

    Having an employee purchase their own tail coverage looks normal and proper except for this: 1) She was never notified of the employer's change in coverage that directly affected her when the new type (cheaper) policy was obtained in 2007, 2) She was not informed of her need to obtain her own coverage when she resigned in 2009 to cover the time period from 2007 and 2009 retroactively until now.

    Now that it is a year later, it is impossible for her to negotiate anything with her current employer to cover her from 2007 thru 2009 or to obtain coverage from any other company. Had she known at the time of hiring, her new employer probably would have picked up this coverage as terms of her employment. However, because she was never informed of this important change by the old company she is stuck.
    Compound this also with the fact she filed a workers comp claim against them, and she appears to be the first person to have ever had their malpractice coverage canceled retroactively like this and it smells of retaliation. While they can show it is based upon the "new" type of policy, they thoroughly enjoyed the fact of informing her that she wasn't covered. And like I said earlier, this would probably have been OK, except they have waited almost a year to inform her.

    As I understand it, if a claim had been made in July 2010, well before this letter went out, the company's insurance carrier would have been responsible.

    Questions:

    Did the former employer owe a duty to inform her of her need to acquire coverage at the time of employment termination from the old firm?

    In 2007, did the employer owe a duty to inform her of the change of the terms of coverage since it was a very material change?

    Since the old employer waited a year before informing her she was being removed from their policy, had they not impliedly accepted responsibility for this coverage by waiting a year?

  • #2
    tail coverage

    This is an insurance question, not an employment question. She should spend the $4K for the tail coverage and move on with her life. Any other outcome or endeavor to make this more "fair" will likely cost a lot more than $4K.
    Bob Bollinger, Attorney
    Board Certified Specialist in NC Workers' Compensation Law
    Charlotte, NC

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