Because professional liability insurance policies are written on a “claims-made and reported basis,” there is no coverage for claims once the policy has terminated or been cancelled—unless you have an extended reporting period (ERP). An ERP extends the policy to allow for the reporting of claims that are made against you during the term of the ERP as long as they resulted from a “wrongful act” that occurred during the term of the policy.
You might need an ERP if your current professional liability (PL) policy has terminated and you are unable to immediately secure new coverage. An ERP would provide protection for claims that may be made during the gap between policies. The CNA PL policy contains an automatic extended reporting period of 60 days.
If you decide to close your practice, you might need coverage for more than 60 days. You might also need coverage if you are merging your firm with another firm. (Whether or not the acquiring firm’s PL insurance would cover these claims can be complicated and depends upon which firm completes the project and the terms of the buy/sell agreement. If you’re in this situation, you should discuss the specifics with your attorney and insurance broker.) The CNA PL policy offers an optional ERP that can be purchased for 1, 3, or 5 years that would protect the firm and its professional staff from claims that may arise from completed projects.
If you’re concerned about claims made after the 5-year ERP has ended, and you intend to retire and cease practicing, you may want to purchase a non-practicing ERP that is available if you’ve been insured with Schinnerer for at least 10 consecutive years. This special, long-term client benefit provides protection for both the retired owners and any employees from claims for professional services provided on behalf of the dissolved firm as long as the projects are completed through construction and any claims from past projects are closed.
Lastly, if a firm can no longer provide services because the principal dies or becomes disabled during the policy term, the death or disability ERP provides an extended ERP with no time limit and at no cost.
It’s important to recognize that professional liability exposures may exist long after the expiration of a policy period since a claim may not be made for several years after the services were performed. Coverage that provides protection during this period is frequently referred to as “tail coverage.” “Tail coverage” is not commercially available as a “stand-alone” product, so the decision to purchase an ERP must be made during the period allowed by your existing PL policy. And remember, an ERP never provides coverage for services performed after the termination of the policy term.