• Home Contact FAQs

• ABOUT PRF
  • PRF Profile
  • Corporate Structure
  • History
• WHAT WE OFFER
• REDUCING RISK
• NEWS
  • The President's Desk
  • PRF Newsletter
  • Articles Of Interest
• GLOSSARY
  • Insurance Terms
  • MICRA
  • Types of Coverage
  • PRF Terms
  • Methods of Resolution
• APPLICATIONS
• RESOURCES

OCCURENCE BASED COVERAGE

With an Occurrence Based policy your coverage is based upon the date of the incident giving rise to the claim (the date of occurrence)—regardless of whether or not the policy is in effect when the claim is asserted. For example, in 1995 an obstetrician/gynecologist was insured with PRF and therefore had Occurrence Based Coverage. However, he relocated and as of 1997 was no longer a PRF Insured. Three years later in the year 2000, the parents of the infant born in 1995 asserted a claim against the physician. He is no longer a PRF Insured, but since he was insured by PRF when the incident giving rise to the claim occurred, he still has coverage for the incident 5 years after it occurred and 3 years after canceling his policy with PRF. It’s important to note that since his policy with PRF was occurrence based, he did not have to purchase expensive “Tail Coverage” when he left the company.

For sake of demonstration, let’s consider the same scenario, with the exception that the obstetrician/gynecologist was insured by a company other than PRF and had Claims Made Coverage. Since his policy was no longer in effect when the claim was asserted in 2000 (but it was in effect at the time of the incident giving rise to the claim) he does not have coverage. In other words, to have coverage with a Claims Made policy, claims must be asserted during the period of time when the policy is in effect. To cover this potential gap in coverage, an insured with a Claims Made policy will usually purchase “Tail Coverage” for the period of time his policy was in effect, thus allowing coverage for potential claims that may be asserted after the policy cancellation date.

The cost of Tail Coverage is calculated based on three factors: 1) the “risk level” of the specialty of the former insured; 2) the period of time the claims made policy was in effect; and 3) the claims history of the former insured. Generally, the window of opportunity to purchase Tail Coverage is very narrow and the former insured is often expected to come up with a lump sum payment. Depending on the three factors mentioned, the cost of Tail Coverage could be in the six figures. This is why Occurrence Based Coverage is a better insurance product than Claims Made Coverage. Occurrence Based Coverage eliminates the need for the purchase of Tail Coverage and allows the insured the freedom to make career choices that involve practice relocation without the heavy financial burden imposed by Tail Coverage.