There are a number of times tail insurance coverage may come in useful for an agency. Also called Extended Reporting Coverage (ERC) these policies are used to extend the time frame in which incidents can be reported past the expiration date of their errors and omissions policy. This can be important for a number or reasons.
One benefit of a tail policy is that it can extend the reporting time of an errors and omissions policy pasts that policy’s expiration date. This means that if a claim is made for an event that occured at a time in which an agency was insured, the agency can still report the claim to their insurer even if their policy has since lapsed.
In many cases a tail policy is advised in the event of sale or a changing of owners of an agency. It allows those under the previous policy to still be covered for anything that happened while the previous policy was in effect. The length of time a tail policy can extend the reporting date depends on the terms of the tail coverage, but may be as much as three years.
If your agency is changing hands, currently for sale, or in the process of changing the policies you offer, tail insurance coverage may be useful for your situation. This coverage can extend the time in which you are allowed to report a claim that falls under your errors or omissions coverage past the expiration date of that policy.