The practice has been sold. The wire has cleared. But prior acts liability does not transfer with the bill of sale — it follows the clinician who rendered the care. Tail insurance is the final capital decision in every Arizona optometry exit, and getting it wrong costs orders of magnitude more than getting it right.
Initialize Practice Equity AssessmentEvery Arizona optometrist's malpractice exposure at sale depends entirely on whether their policy was written on a claims-made or occurrence basis. Lumina Medical Capital addresses insurance structure as a pre-close due diligence item in every transaction — not a post-close afterthought.
Covers any claim arising from an incident that occurred during the policy period — regardless of when the claim is filed. If a patient files a complaint in 2030 about an examination performed in 2023, an occurrence policy active in 2023 provides coverage. No tail insurance is required when an occurrence policy is cancelled or when a practice is sold.
Covers only claims filed while the policy is active — not incidents that occurred during the policy period but are claimed after cancellation. When a claims-made policy is cancelled or not renewed, all prior-acts exposure is immediately uninsured. A tail policy (Extended Reporting Period endorsement) must be purchased to maintain coverage for prior acts after the policy is cancelled.
Optometry tail coverage typically costs 150–250% of the final annual claims-made premium. For an OD paying $3,200/year in malpractice premium, a tail policy costs $4,800–$8,000 — purchased as a one-time premium at policy cancellation. Tail coverage is usually purchased from the same insurer as the underlying claims-made policy, though the market can be shopped for better pricing.
Tail policies are available in 1-year, 3-year, 5-year, and unlimited-duration formats. For optometry practice sales, a minimum 3-year tail is standard — the Arizona statute of limitations for professional malpractice is generally 2 years from discovery, with an outer limit of 3 years from the act or omission. Unlimited tail coverage is available and recommended for high-volume practices with therapeutic contact lens and injection procedures.
Tail coverage cost is negotiable in the Asset Purchase Agreement. Industry practice allocates tail cost to the seller (as the party with prior acts exposure), but buyers frequently accept responsibility as part of overall deal economics — particularly in competitive seller's markets. The tail premium is a closing cost that should be modeled in the seller's net proceeds calculation from the first day of negotiation.
"Nose coverage" (Prior Acts coverage) is an alternative to tail coverage — the incoming buyer's carrier extends coverage backward to the seller's prior acts under the new policy. This approach is less common but eliminates the seller's need to purchase a tail policy. Whether nose or tail coverage is used, both parties must confirm that prior acts are covered before the transaction closes.
Tail coverage duration must align with the realistic claims exposure window — which is defined by Arizona law, not insurance convention.
Arizona's general professional malpractice statute of limitations is 2 years from the date the patient discovers (or reasonably should discover) the injury. For most optometry malpractice scenarios, this means a claim can be filed up to 2 years after the patient becomes aware of the harm — not 2 years from the examination date.
Arizona imposes a 3-year outer limit (statute of repose) from the date of the act or omission, regardless of when the patient discovered the injury. A 3-year tail policy is the minimum defensible coverage window for an Arizona optometry practice transition.
Claims involving minor patients are subject to extended timelines — the statute of limitations does not begin running until the minor reaches age 18. Practices with significant pediatric patient panels (myopia management, pediatric vision therapy) should consider 5-year or unlimited tail coverage to account for this extended exposure window.
Malpractice tail is one of a dozen post-close decisions that define a transaction's success. Explore Lumina's complete post-sale transition consulting framework — from staff retention to earnout management to payer credentialing continuity.
Explore Transition Consulting →A malpractice tail gap is not a theoretical risk — it is a catastrophic personal financial exposure that can claw back every dollar of the exit multiple you spent years building. Lumina addresses insurance structure at the start of every transaction, not the end.
Initialize Practice Equity Assessment