The clicky on the Mortal Coil is a permanent buff that goes on your target of choice and even after you cast it, you are free to put a different earring on in it's place because the buff will stay on even when the item gets removed.
Like Pinski said, you will always take 5% of the damage incoming on whoever you put the buff on. I however don't have any problems with it. I've kept the buff up full time on the OT as well as the MT when I'm in the MT group. I've never gotten interrupted by taking damage. The only fight so far that I've encountered that interrupts me like crazy when I have the buff up is Trakanon.
Also, I never see myself taking any health damage from having the buff up. I have the
Dreamweave Ringmail Leggings and the
Rune Etched Helm, both of which proc wards on yourself as well as your group members and they proc a lot. If you have the helm, you will find that Hateshield, the ward proc from it, will almost always be on you if you have group heals rolling out frequently. The proc lasts for 30 seconds and the base ward is 1500. I've had some for 1700-ish on a crit and some for 2000+ with the healer earring from the RE2 Blue Glowy collection and those wards regenerate in ticks of 300 for the whole duration, so any damage you're taking, isn't affecting your health. Another item that would help protect against the damage is the
Brace of Corporeal Darklight from SoH. It has a chance to absorb attacks on you.
Hope this info helped.