Dear VanEd: Another agent in my office recently suggested I purchase "tail coverage" to cover a period of time when my license was inactive. What the heck is tail coverage? And should I get it?
From VanEd: Good question! This is simply a type of E&O coverage that will bridge the gap between activities that occur when you are licensed and a period of time after your license expires, is placed inactive or you retire. This type of coverage is only applicable to acts that occur during your license period.
Below is a copy of an announcement about "Extended Reporting Period" (ERP or "tail" coverage) from one of the top Errors and Omissions providers in the country, RISC Insurance.
PROTECTION AFTER YOUR POLICY EXPIRES
If an insured licensee retires, places his/her license on inactive status, or allows his/her license to expire, the ... policy insures the licensee for claims made and reported within 90 days of the expiration date of the policy, provided the error or omission upon which the claim is based took place after the retroactive date and before the expiration date. Claims made more than 90 days after the expiration date will not be eligible for coverage consideration under the ... policy, unless an optional Extended Reporting Period (ERP) Endorsement is purchased.
OPTIONAL ERP Endorsement: Optional ERP Endorsements are available to licensees who are currently insured ... under a policy and who are not renewing their coverage for any reason, including because they are retiring, inactivating their license, or obtaining insurance through another carrier.
An ERP endorsement may be purchased within the first 90 days after the licensee’s policy expires and allows the insured to report claims made after the expiration date and during the ERP. The optional ERP Endorsement is important because many professional liability claims are not made until years after the underlying transaction occurred. If a claim is made after the ... policy expires and there is no applicable ERP, then the claim will not be covered under the ... policy. Licensees with coverage expiring ... may obtain an optional ERP endorsement for one year (plus any applicable endorsement premium), two years (plus any applicable endorsement premium) or three years (plus any applicable endorsement premium).
NOTE: The fees listed have been removed from the announcement as they will likely vary from provider to provider. Also, not all providers will offer this type of coverage so it is important to contact your E&O provider directly to determine your eligibility and the costs associated. And don't forget to ask for specifics regarding what the tail coverage will cover in case it is not an all-inclusive type of coverage. And licensees should be aware that, as stated in the announcement, this is usually not a new policy but rather an endorsement to your current policy. That means if your current carrier doesn't offer this type of endorsement you may need to look into changing carriers if you desire to put this in place.