Counselors, medical doctors, psychologists and insurance agents are usually offered insurance on a “claims made basis.” Counselors need professional liability coverage in their practice need should be aware of the difference between a “claims made” and an “occurrence” policy. ACA members have the preferred type of professional liability insurance coverage (occurrence) available to them through the sponsored program. Before agreeing to any type of professional liability insurance, it is important to know the distinctions in these policy types.
“Claims-made” policies require both that the claim occur during the policy period and be reported in the same policy period. These policies were established to protect the insurance company in those instances where claims can be made many years later. Thus, the rating and experience factors can be easily determined. The difficult issues concerning exposure to asbestos were a key factor in going to claims-made coverage. A worker who was exposed to asbestos in 1980, but didn’t realize the onset of symptoms until 2005 would be excluded from making a claim under this type of insurance.
Some claims-made policies are issued with a retroactive date. If you have a retroactive date, you will be protected back to this date. If you wish to change from a claims-made to an occurrence policy, you need to purchase additional protection through a policy known as a “tail.” A tail policy is usually rather costly, but very necessary when converting to occurrence. If you simply drop a “claims-made” policy, you are without future protection.
“Occurrence” policies cover incidents that occurred during the policy period, but can be reported at any time in the future. If a counselor is working with a child who manifests difficulty in their life after they become an adult, the client may try to make a claim by alleging the counselor misdirected them and caused emotional or economic damage. An occurrence policy would thus protect the counselor who had a client in 2000, but didn’t report the case until 2006.
As a rule “claims-made” policies are initially less expensive than occurrence policies, but some of them have step increases through the first four or five years, until a rate is achieved that is comparable to an occurrence policy. At that point, the insurance company may convert the policy to the occurrence type.
Bottom-line? Before you purchase your professional liability coverage, be sure you know what you are getting. If you are uncertain of the type of coverage you are applying for, do not hesitate to call the ACA Insurance Trust at 800-347-6647 extension 284. In addition, ACAIT also offers a free CD on risk management strategies – ask for it when you call.
ACA offers online courses using streaming video that addresses the concerns of counselors relating to potential legal issues. The course is called Legal Aspects of Counseling. Upon successful completion of this course, The ACA sponsored carrier will give you a 10% non-cumulative credit which can be applied to your premium for up to three years. To register: go to www.counseling.org/resources and click on Continuing Education Online.
