No Implied Nose/Tail Coverage in At Will Employment
To ensure continuity of malpractice coverage, get nose and tail coverage from your employer in writing.
Many licensed professionals are offered malpractice insurance through their employer as a workplace benefit. However, dependent upon the type of insurance that coverage may only be effective for that licensed professional when working with that particular employer, covered by their particular insurance carrier.
Types of Insurance
Specifically, there are two types of malpractice insurance coverage, claims made and occurrence. Claims-made coverage protects the insured from malpractice claims only if that company providing insurance coverage for the insured at the time of the alleged incident is the same company at the time the claim is filed in court. For example, if an incident occurred in 2019 when the insured was covered by the employer insurance and the claim is made in 2021 when the insured is with another employer, the insured would not be covered because he/she did not have the same continuous insurance.
Occurrence coverage means that the policy responds to events that occur during the policy period regardless of when the claim is made. Once the policy is expired, the policy will apply, even if the claim is made many years after the triggering event. So, even in the above example, the insured was still be covered because the incident occurred when the insured was covered—the date of filing is irrelevant.
Unfortunately, most employers have claims made.
Extending Claims-Made Coverage
There are three ways to extend claims-made coverage:
Continuity of coverage - even after you leave a job, you can extend your coverage by securing a job with an employer who has the same insurance company or purchasing that coverage on your own.
Tail - this is a policy option (i.e. add-on and more expensive) provided to your employer to continue to provide coverage for employees for a set period of time even after they depart the employment relationship
Nose - this is another policy option provided to your successive employer to provide coverage in advance of the employment relationship. It is also called "prior acts" coverage
No Implied Coverage Outside of Employment
Keep in mind that this distinction is important for you because there is nothing that compels the employer to provide insurance coverage for you at all. And even if they do offer insurance coverage, that coverage is for the employment relationship - not for events transpiring before or after that relationship ends.
If you do have a conversation with your prospective employer at the time of hire about insurance, get clarity on how it intends to cover your malpractice insurance. And get that clarity in writing. Even if there is a written commitment to provide insurance post-termination or conclusion of employment, that might be enough to enforce it through a claim of breach of contract in the event post-employment insurance is not provided.
Keep in mind that just because the employer is not required to provide malpractice insurance, does not mean that the employer is not required to indemnify their employees. California has a peculiarly strong public policy requiring employers to indemnify employees sued for conduct occurring as part of their employment. Labor Code, section 2802 codifies this policy. California employers, thus, must indemnify employees if their conduct falls within the scope of employment.
The duty to indemnify is not, however, a duty to defend. The statute merely requires California employers to indemnify their employees. Thus, while employers can choose to offer counsel to help defend an accused employee (and for strategic reasons may want to exercise that choice), California law permits an employer to decline to defend its employee and challenge to see whether the employee’s conduct fell within the scope of employment. This means declining to intervene and forcing the employee to file a cross-complaint for statutory indemnity.
The employee defendant, to claim indemnity, must show that the claim arose from the employee’s employment. If the employee makes that showing—either during the litigation or in a separate action—the employer must pay all of the employee’s necessary costs and fees, including attorneys’ fees and any judgment.
Moreover, one of the most important aspects of Section 2802 is its provision that “necessary” expenses include “attorney’s fees incurred by the employee enforcing the rights granted by this section.” This means if the employer attempts to dispute that the conduct occurred within the scope of employment and loses, the employer will be required to pay the attorney fees for the employee seeking to enforce this right to indemnity.