When it comes to malpractice insurance, you have two coverage options: Occurrence or Claims-made. While there is no difference in the kind of injury or damages covered under these two coverage options, they differ in how and when the coverage responds.
Occurrence
An Occurrence policy protects you from any covered incident that “occurs” during the policy period, regardless of when the claim is reported. This Coverage protects you from the day you purchase the policy and beyond, even if you retire, take a leave of absence, or cancel the policy. In effect, an Occurrence policy offers permanent coverage for incidents that occur during the policy period.
Occurrence limits “restore” each year so that claims paid for incidents arising from one policy year do not deplete limits available to cover claims from other years. Each year an Occurrence policy is in force represents a separate set of limits. Ten years of coverage under a $1M/$3M Occurrence policy could provide the insured protection for up to $30MM in claims (ten year combined annual aggregate limit). You do not need to purchase "Tail Coverage" with this type of policy.
Claims-Made
Claims-Made policies provide coverage against claims for alleged incidents that both occur and are reported on or after the retroactive date and before the policy terminates. In simple terms, Claims-made coverage only protects you during the year you have the policy. That coverage only continues year after year as long as the insured continues to pay premiums for the initial policy and any subsequent renewals.
Claims-made limits DO NOT “restore” each year the way Occurrence Coverage limits do. The policy limits in place when the policy is purchased remain the single set of limits available to protect the insured from all claims that could arise from care provided during the years the policy is continuously in force. The insured does not have a separate set of limits for each year the policy is in force. A Claims-made policy will cover claims after the coverage period ONLY if the insured purchases extended reporting period or “Tail Coverage."
What is "Tail Coverage"?
Tail Coverage is an optional (but highly recommended) endorsement/policy which allows you to report claims for alleged injuries that occur while your claims-made policy was in force but after it has ended. Usually, you need to purchase a tail during a leave of absence, starting new employment where your prior employer paid for coverage, moving from a claims-made policy to an occurrence policy, etc.
Claims Made Step Factor
Because both the incident and the claim have to be filed during the coverage period, the Claims-made insurer has little risk of loss the FIRST year a new policy is in force. That is why the first year premium for Claims-made coverage is lower. Each year the policy continuously renews, the coverage period expands, and the insurance company’s exposure to loss increases.
Professional Entity Coverage
This option offers coverage for your corporation or professional entity. Most carriers offer the option of sharing the limits of your personal malpractice insurance policy with your entity or purchasing separate limits for an additional premium.
Separate Limits Coverage
If you own all or a portion of your practice, you may qualify for an entity malpractice insurance policy with separate limits. This allows defense costs and indemnity payments to be paid on behalf of your practice — separately from your individual policy limits.
Shared Limits Coverage
If you have a solo corporation and have no employed or contracted dentists, then you may choose to share your individual policy limits with your practice. This means defense costs and indemnity payments will be paid on behalf of both you and your practice under one shared set of limits.
As a business owner, how do I structure my policy to protect against claims arising from my associates’ and specialists’ actions?
There are two distinct ways a practice owner or entity can be covered for the acts of affiliated providers, and they have meaningfully different implications.
Vicarious Liability Coverage (on Your Own Policy) protects you for claims arising from the acts of someone else — typically an employed or contracted dentist — based on your legal responsibility as employer or principal.
It sits on your policy, triggered by your legal exposure.
You control the policy terms, limits, and defense strategy.
Coverage can respond even if the individual provider has no policy of their own.
Your insurer defends and indemnifies you, not the provider.
Claims here typically affect your entity’s loss history, not the individual provider’s own record.
Being Named as Additional Insured on Another Provider’s Policy means their policy is extended to cover you for claims arising from their acts.
You do not control the limits, carrier, or policy terms.
Coverage depends on that provider maintaining their policy correctly.
Their primary limits are shared with you and can be eroded by a large claim.
Your defense rights are typically secondary to the primary insured’s interests.
Side-by-Side Comparison
Factor
Vicarious on Your Policy
Additional Insured on Theirs
Notes
Policy control
Full
None
You manage renewals and terms.
Limit dependency
Your own limits
Shared with primary insured
Large claims may erode available limits.
Coverage continuity
You manage it
Depends on their renewals
A lapse can create a gap in your protection.
Defense control
Your carrier defends you
Their carrier’s interests first
That can conflict with your own defense interests.
Effect on your loss history
Yes, if a claim is paid
No
That can affect future premiums.
Bottom line: Vicarious liability coverage on your own policy is generally the stronger, more reliable protection — especially for employed associates. Additional insured status can still help for contractors, but it is a weaker position because you remain dependent on someone else’s policy decisions. Ideally, a well-structured practice has both: its own policy with vicarious liability protection and contractor agreements that require separate coverage with the practice named as additional insured.
Professional Liability & Malpractice FAQ
What is Professional Liability Insurance?
Professional liability insurance (PLI) protects professionals and their companies against third-party
claims for negligence, mistakes, or inadequate work that results in a client's financial loss. It is
commonly known by several names depending on the industry:
• Errors & Omissions (E&O) — used in law, finance, consulting, technology, and real estate
• Malpractice Insurance — used in medicine, dentistry, and other licensed healthcare
professions
• Professional Indemnity — common terminology in the UK and Australia
The policy typically covers attorney fees, court costs, and settlements or judgments arising from
covered claims.
Is Malpractice Insurance the Same as Professional Liability Insurance?
Not exactly — though the terms are often used interchangeably. Malpractice insurance is a
specific type of professional liability insurance designed for licensed healthcare professionals
(doctors, nurses, dentists, physician assistants, therapists, etc.).
Professional liability insurance is the broader category. It covers a wide range of industries — law,
finance, architecture, marketing, counseling, and more. Malpractice insurance focuses on the
physical harm or clinical errors that can occur in patient care, while standard E&O policies address
financial or economic losses from professional errors.
Key takeaway: All malpractice insurance is professional liability insurance, but not all professional
liability insurance is malpractice insurance.
Who Needs Professional Liability / Malpractice Insurance?
Any professional who provides advice, services, or specialized expertise to clients should strongly
consider this coverage. It is often legally required or mandated by employers, hospitals, and
professional licensing boards. Common professions include:
• Healthcare: Physicians, surgeons, nurses, dentists, physician assistants, therapists, social
workers
• Legal & Financial: Attorneys, accountants, CPAs, financial advisors
• Technology & Consulting: IT professionals, software developers, management consultants
• Design & Construction: Architects, engineers, contractors
• Other: Real estate agents, insurance agents, beauticians, massage therapists, educators
Even employees — not just business owners — may want their own policy, since employer-
provided coverage is primarily designed to protect the organization, not the individual professional
or their license.
What Does Professional Liability Insurance Cover?
A standard policy typically covers:
• Negligence — failing to meet the accepted professional standard of care
• Errors & omissions — mistakes made or services not delivered as promised
• Misrepresentation — giving incorrect or misleading professional advice
• Breach of duty — failing to fulfill a professional obligation
• Defense costs — attorney fees and court costs, even if the claim is unfounded
• License defense — some policies include coverage for regulatory or licensing board
proceedings
What Does Professional Liability Insurance NOT Cover?
Common exclusions across most policies include:
• Intentional or dishonest acts — deliberate misconduct, fraud, or illegal activity
• Bodily injury or property damage — these are covered under General Liability insurance
• Employment disputes — wrongful termination, discrimination, or harassment claims
(covered by EPLI)
• Cyber liability — data breaches typically require a separate cyber insurance policy
• Fee disputes — failure to collect payments or third-party reimbursement disagreements
• False advertising — misleading marketing claims fall outside PLI scope
• Physical or sexual abuse — though if claims are unfounded and no guilt is admitted, some
carriers may provide defense coverage
Important: Professional liability policies are profession-specific. If you expand your services,
notify your insurer to update your coverage.
Which is better: Claims-Made or Occurrence Policies?
Both have advantages. Claims-made policies can be more affordable initially and allow for flexible
limit adjustments over time. Occurrence policies offer permanent coverage for past incidents
without additional cost. The right choice depends on your profession, career stage, and financial
situation. Consult a licensed agent with The Firebird Agency for personalized guidance.
What is Tail Coverage and Do I Need It?
Tail coverage — formally called an Extended Reporting Period (ERP) Endorsement — is an add-
on to a claims-made policy that allows you to report claims after your policy has been cancelled or
terminated, as long as the incident occurred during the original policy period.
You need tail coverage if you have a claims-made policy and you are: switching insurers, retiring,
changing jobs, or closing your practice. Since most malpractice claims are filed 18–24 months
after an incident, this coverage is essential. Tail coverage is NOT required if you have an
occurrence policy.
Cost note: Tail coverage can be expensive — sometimes approaching the cost of a full annual
premium. Some carriers waive tail coverage fees for retirement, death, or long-term policyholders.
What Coverage Limits Should I Choose?
Most professionals carry a standard limit of $1 million per occurrence / $3 million aggregate. This
means the insurer will pay up to $1 million for a single claim and up to $3 million total in any given
policy year. Coverage limits are expressed in two parts:
• Per-occurrence (or per-claim) limit: Maximum payout for a single incident
• Aggregate limit: Maximum total payout over the life of the policy
State laws, hospital credentialing requirements, or client contracts may dictate minimum coverage
levels. Higher limits provide more protection but increase premiums. Consult your licensing board,
employer, or broker to determine the appropriate limits for your specific situation.
Do I Need My Own Policy If My Employer Covers Me?
Having your own policy is strongly recommended even if your employer provides coverage.
Employer-sponsored policies are primarily designed to protect the organization — not you
personally. Important gaps include:
• License defense: Employer policies may not cover regulatory board complaints or licensing
investigations
• Conflicts of interest: If your interests and your employer's diverge, the employer's insurer
may not fully represent you
• Tail coverage gaps: If you leave the employer, coverage for past incidents may not follow
you
• Moonlighting or volunteer work: Employer policies typically exclude activities outside of
official duties
Individual policies are often affordable (especially for employed professionals) and provide an
important personal safety net.
What is the Difference Between Professional Liability and General Liability Insurance?
These are two distinct types of coverage that complement each other:
• General Liability (GL): Covers physical incidents — a client slipping on your floor, property
damage, or bodily injury caused by your business operations
• Professional Liability (PLI/E&O): Covers financial or reputational harm caused by your
professional advice, services, or errors
Most professionals who interact with clients need both types. General liability will not cover claims
of negligence or malpractice, and professional liability will not cover a slip-and-fall at your office.
How Do I File a Claim Under My Policy?
If you receive a complaint, demand letter, or notice of legal action, follow these steps:
• Notify your insurer immediately — most policies require prompt notice of any claim or
potential claim
• Do not admit fault — any admission can affect coverage
• Preserve all documentation — records, correspondence, and notes related to the incident
• Cooperate fully with your insurer and assigned legal counsel
Understand your duty to defend vs. duty to indemnify — some policies cover defense costs even if
the ultimate claim
What is a Moonlighting Policy?
A Standalone Moonlighting Policy is a separate individual malpractice policy purchased by the
dentist to cover all outside work independently of their primary employer's policy. This gives the
dentist full control and portability. Who Needs It? A moonlighting policy is most relevant for: •
Dental residents who take on shifts at outside clinics or emergency dental centers • Associate
dentists employed at one practice who also work at another • Military or VA dentists providing
private-sector care on off days • Employed dentists doing volunteer work (e.g., mission trips, free
clinics) • Dental educators who also see patients in a separate clinical setting
What is Vicarious Liability?
Vicarious liability is essentially defined as liability for the acts of
someone else. Theoretically, entities cannot commit malpractice
themselves, but they can be held vicariously responsible for the actions
or inactions of a dentist or any healthcare professional they employ or
contract with to deliver services. A dentist (and/or a dental entity) is
responsible for the acts of those who work under the dentist's
supervision, whether that supervision is direct or simply implied. It is
important for dentists to be aware of this in the course of overseeing the
actions of all of their staff members that are involved with patient contact
to any degree. And it is critical that they be aware of which duties may be
properly delegated and which must not.
This extends surprisingly broadly:
Employed dentists and associates
Dental hygienists
Dental assistants (even untrained/uncertified ones)
Receptionists and front-office staff — one case involved a patient filing a malpractice suit
against a dentist alleging vicarious liability for the negligent actions of a receptionist who
caused phosphoric acid exposure.
Self-employed associates and independent contractors — your dental practice could be
held vicariously liable for treatment malpractice provided by someone who is not an actual
employee, such as self-employed associates.
For dentists who employ other dentists, hygienists and auxiliary staff, many carriers extend
coverage for vicarious liability within their limit of liability within the standard coverage form.
Companies which employ dentists, hygienists and auxiliary staff need to consider purchasing a
separate corporate policy to appropriately cover their vicarious liability exposure. Without such
coverage, you could be left to incur defense costs and liability judgments.
Vicarious liability coverage is often overlooked by practices simply because practice managers
and dental professionals either don't realize the owner dentist and/or the practice can be sued for
a malpractice claim resulting from another provider they employ or share an office with, or it's
assumed the other dentist or physician's professional liability policy will cover the owner dentist
and his/her practice.
This FAQ is for informational purposes only and does not constitute legal or insurance advice. Coverage terms, exclusions, and availability vary by insurer and state. Consult a licensed insurance professional at The Firebird Agency for guidance specific to your situation.
While our offices are located in Arizona and California, we are licensed all over the country.
