Guides · Risk

Locum Malpractice & Tail Coverage Basics

Published 5 August 202612 min read

"Malpractice is covered" is the most reassuring and least informative sentence in a locum contract. It is almost always true and it almost never answers the question that matters, which is what happens to a claim filed three years after you finished the assignment.

This guide covers the two policy types, what a tail is and what it costs, the clauses that quietly move risk onto you, and what to ask before signing. It is written for clinicians, not brokers, and it is general information — the policy wording always governs.

The two policy types

Occurrence

An occurrence policy covers incidents that happened during the policy period, whenever the claim is eventually made. Treat a patient in March 2026 under an occurrence policy, get sued in 2032, and the 2026 policy responds — even though it lapsed years earlier and you never paid another premium.

Occurrence cover needs no tail, ever. It is the cleaner product, and it costs more up front for exactly that reason.

Claims-made

A claims-made policy covers claims reported while the policy is in force, for incidents after a "retroactive date". Treat a patient in March 2026, let the policy lapse in June, get sued in 2027 — and nothing responds. The claim arrives when you have no policy.

Claims-made is cheaper in the early years and is what most agencies buy. It is not a bad product. It is a product with a hole in it, and the tail is what fills the hole.

Tail coverage: what it is and what it costs

A tail — formally an Extended Reporting Endorsement — extends the reporting window of a claims-made policy after it ends, so claims filed later for incidents during the covered period are still picked up. Buy it once, and it typically runs indefinitely.

It is priced as a multiple of the last annual premium, rising with each year the policy was in force and plateauing after roughly four or five years. Industry practice generally puts a mature tail at 150% to 250% of the final annual premium, though the range varies widely by carrier, specialty and state. For a physician in a high-risk specialty in a high-cost venue, that can be a five-figure sum arriving at exactly the moment you stop earning from that assignment.

There are two cheaper routes that sometimes work. Some carriers waive the tail on death, disability or retirement after a qualifying age and years of coverage — worth knowing about long before you need it. And a new carrier can sometimes issue "prior acts" or nose coverage, picking up your retroactive date instead, which is often cheaper than buying a tail from the outgoing carrier. Nose coverage only works if you have continuous cover, so the time to arrange it is before the old policy lapses, not after.

Who buys the tail on a locum assignment

This is the single most important question in the contract, and the answer is genuinely variable.

• Agency-provided occurrence cover. The best outcome. No tail is needed, and the exposure ends when the assignment does. Ask for it in writing and ask for the certificate.
• Agency-provided claims-made with the agency buying the tail. Fine, provided the obligation is written into the contract and is not conditional on how the engagement ends. Some contracts make the agency's tail obligation disappear if you terminate early or breach any term — read that clause carefully.
• Agency-provided claims-made with no tail. The dangerous one. You are covered while you work and exposed afterwards, and the exposure lasts as long as the statute of limitations does. If a contract is silent about the tail, assume it is yours.
• Your own policy. Common for clinicians who work through multiple agencies or take direct contracts. More administration, more control, and one continuous retroactive date rather than a series of fragments.

A locum working through three agencies in a year on three separate claims-made policies has three retroactive dates and three potential tails. That fragmentation is a strong argument for carrying your own policy once you are working steadily.

Clauses that quietly move risk to you

Consent to settle, and the hammer clause

A consent-to-settle provision means the carrier cannot settle a claim without your agreement — valuable to a clinician, because a settlement is reportable to the National Practitioner Data Bank and follows you through every future credentialing application.

A hammer clause takes most of it back. It says that if you refuse a settlement the carrier recommends, your cover is capped at what the settlement would have cost — leaving you personally liable for the excess if the case goes worse at trial. A "soft" hammer splits that excess with the carrier; a full hammer does not. Find out which one you have.

Limits, and whether they are shared

Limits are quoted as per-claim / annual aggregate — $1M/$3M is the common baseline, and some states and facilities require specific minimums. The question to ask is whether the limits are yours or shared across every clinician on the agency's policy. A shared aggregate exhausted by other people's claims leaves you with less cover than the certificate suggests.

Defence costs inside or outside the limit

If defence costs erode the limit, a long case can consume a substantial share of your cover before any settlement. Outside-the-limit defence is materially better and worth asking about.

Indemnification and hold-harmless

Some agency and facility contracts ask you to indemnify them for claims arising from your services. That can extend beyond what your malpractice policy covers, and an uninsured contractual obligation is a personal one. This is a clause to have a lawyer look at, not to skim.

Scope and venue

Cover follows the scope of practice and the locations named. Procedures outside the described scope, moonlighting elsewhere, telemedicine across state lines, or supervising others may fall outside it. If your assignment involves supervising APPs or residents, confirm that vicarious liability is covered.

The questions to ask before you sign

1. Is the policy occurrence or claims-made? Get the answer in writing.
2. If claims-made — who buys the tail, and is that obligation stated in the contract itself?
3. Does the tail obligation survive early termination, non-renewal or a dispute?
4. What are the per-claim and aggregate limits, and is the aggregate shared with other clinicians?
5. Are defence costs inside or outside the limits?
6. Is there a consent-to-settle provision, and is there a hammer clause attached to it?
7. What is the retroactive date, and does it cover the whole assignment?
8. Who is the carrier, and what is its financial strength rating?
9. Does cover extend to supervision of APPs, telemedicine and any call obligations?
10. Can I have a copy of the actual certificate of insurance, not a summary?

Ten questions, one email, and it takes a recruiter ten minutes to answer. An agency that will not put the answers in writing has told you something useful.

The tax treatment

Malpractice premiums you pay yourself are ordinary and necessary business expenses under IRC § 162, deductible on Schedule C. That means they reduce net profit and therefore reduce both income tax and self-employment tax — one of the more valuable deductions a locum has, precisely because it is often the largest.

A tail premium is deductible in the year you pay it. Because it lands in a year when you may have stopped generating income from that work, the timing can be awkward: a large deductible expense against a small profit wastes part of its value. If you can foresee a tail purchase, it is worth discussing the timing with your CPA rather than discovering it in April.

Enter your premium in the calculator and it will show what the deduction is actually worth at your marginal rate.

Sources and further reading