Extended Reporting Coverage (ERP) is the term for tail coverage definition. This type of insurance provides additional coverage for incidents or claims that may have occurred during a period when an Errors & Omissions policy was in force, which are reported after the term of that policy has expired.
Who Needs It?
Tail coverage is especially important if you are buying or selling an agency, or significantly reducing your services. If former clients bring claims against you for work done prior to these events, tail coverage can provide funds for legal fees and damages.
How Much Do You Need?
Your particular needs will depend on the size and scope of your agency, but there are a number of good guidelines to consider.
- purchase as much coverage as you can afford
- if you are purchasing an agency, make sure the seller has at least three years of tail coverage
- make sure the policy is bilateral and can be used whether you or the carrier cancelled for any reason other than default.
- many policies can be extended indefinitely, so cover the longest period possible
The extension of the reporting period that is the tail coverage definition allows you to feel comfortable knowing that possible claims from long-completed work need not jeopardize your future, nor leave you in a situation where you are personally liable.