As a lawyer, you understand how paramount professional liability insurance is in safeguarding your legal practice. It’s your armor against potential legal malpractice claims that may arise in the course of your work.
However, what happens when your policy expires and you’re left vulnerable to claims stemming from past work? This is where Extended Reporting Periods (ERPs) come into play. ERPs ensure that you still have some protection—even after your policy lapses.
A Closer Look at Extended Reporting Periods
Often referred to as “tail” coverage, ERPs are a fundamental component of professional liability insurance for lawyers. These periods extend the time to report claims arising from wrongful acts that occurred before the policy’s termination. ERPs serve as a bridge between the termination of your policy and the potential emergence of claims.
Let’s take an in-depth examination of Extended Reporting Periods…
- ERP Coverage Extension1
An Extended Reporting Period is a limited window of time past the end of a claims-made policy during which the insured may report claims to the insurance carrier. The ERP extension only provides coverage for any claims that arise from wrongful acts that occurred before the ERP began. Basically, ERPs protect you against any claims that come about after your insurance policy is canceled, non-renewed, or when any significant changes occur (e.g., acquisition, cessation of coverage).
- Protecting Against Loss
ERP coverage extensions give you the ability to protect against loss from claims that materialize after your policy is canceled or non-renewed. This protection is crucial if your organization is acquired, wound down, or decides to discontinue purchasing coverage.
- Claims-Made Policies
Claims-made policies offer coverage for claims made against the insured during the policy period that arise from actual or alleged past wrongful acts and are subject to any retroactive date or prior acts exclusion. The coverage applies to claims made during the policy term, if the alleged wrongful act occurred after the retroactive date and before the policy termination date.
- Free Period After Policy Expiration Date
Some legal malpractice insurance policies include a “free” Extended Reporting Period. This is basically a grace period during which you can report claims without incurring additional costs after your policy has expired. Traditionally, this period ranges from 30 to 60 days. However, the duration of this free period can vary significantly and is influenced by state insurance regulations and the specific terms of your policy. It is imperative to be aware of the length of the complimentary coverage.
- Purchased Period After Policy Expiration Date
Once your policy has terminated, you have a limited time, usually 30 to 60 days, to elect a purchased ERP. Your election and full premium payment must be made during that limited time. These periods are typically available in varying duration—from one year to six years, sometimes an unlimited time period—with costs associated with each. The availability and cost of purchasing an ERP depend on your insurance carrier as well as the terms of your policy and your specific requirements. Since purchased periods are flexible, you are able to tailor your coverage to your specific, anticipated needs.
- Retirement Tail
For lawyers who are contemplating retiring or leaving the legal profession, there is a unique consideration for ERPs. Most insurance policies offer a retirement tail, which offers an ERP that is either free of charge or available at a reduced cost. The eligibility criteria for a free or reduced-cost retirement tail can vary. These criteria often encompass factors such as age, years of continuous coverage, and circumstances surrounding retirement.
The retirement tail is typically offered as a benefit to lawyers who retire or otherwise voluntarily cease, permanently and totally, the private practice of law. Note that this retirement Extended Reporting Period may cease if the insured resumes the private practice of law, at which time it ends.
- Death or Disability Tails
If the insured dies or becomes permanently disabled during the policy period, an Extended Reporting Period may be available. However, not all policies are the same, so make sure to pay attention to the requirements about notifying the insurer of any such death or disability. In many insurance policies, this notification must be made within 60 days of the expiration of the policy.
The Need for Extended Reporting Periods
Claims-made policies offer excellent coverage for insured lawyers, but when a claims-made policy expires or is not renewed, the insured no longer has any coverage, leaving a significant gap in protection. This is where ERPs come into play since they can extend the time available for reporting claims.1
In a scenario where the insured or insurance company decide not to renew the policy, due to certain reasons, the ERP provision grants the insured the right to extend the policy for past acts only, for a finite period. This ensures coverage for claims that may arise from any past wrongful acts.
Extended Reporting Periods are usually not available if the insurance company cancels or refuses to renew the policy due to…
- Non-payment of premiums
- Non-compliance or policy terms and conditions by the insured
- Misrepresentation or omission on the application
- Revocation, suspension, or surrender of the right to practice law at the request of a regulatory authority
It is important, however, to note that even with an ERP in place, not every claim can be covered. ERP coverage only applies to claims arising from wrongful acts that occurred prior to the inception of the ERP, so any claims stemming from acts occurring after the ERP began would not be covered.
Extended Reporting Periods are a necessary cornerstone of professional liability insurance for lawyers. They offer the flexibility to report claims for past work, furnishing the required protection even after your policy has terminated. Acquainting yourself with the array of options available—including free periods, purchased periods, and retirement tails—is critical for making well-informed decisions about your professional liability coverage. Be sure to discuss these options with an insurance professional.
Questions?
At the end of the day, Pearl Insurance is here for you. We work tirelessly to help you find a policy that fits your firm’s exact needs. Pearl takes our responsibility to protect your firm seriously and will always put people before profit.
Want to know more? Find out for yourself.
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1“Extended Reporting Period (ERP) Explained.” Insurance Training Center, 2023.
