An Extended Reporting Period (also known as ERPs or “tail coverage”) is intended to cover potential gaps between policies or practices, allowing you to extend the time available to report a claim made against you after last policy has expired. These options do not provide coverage for claims made over work first begun or performed after that expiration, however.
Let’s think about different scenarios where an extended reporting period is relevant:
You leave a firm to strike out into solo practice:
If your prior firm is staying in business and maintaining its malpractice coverage, then you should be able to safely assume that their insurance policies will cover you for any claims made against you after you leave the firm, so long as the claims arise from work you did while at that prior firm. Professional liability policies are written to cover work by former members of a firm and, so long as the firm continuously maintains coverage, any in force policy should relate back to any work done by anyone from the firm in prior times.
The caveat here, however, is that, if your former firm goes out of business or fails to continuously maintain coverage, you may need to seek some sort of endorsement from their past carrier, or from your current carrier, to fill in any possible gaps in coverage.
You leave a firm to join another firm that has been in business for a while:
If both firms have maintained continuous coverage—even if they have switched carriers now and then—you should not need to worry about filling in any gaps on your own. This is because your former firm’s insurance policies should speak to any claims brought after your departure over work you did while with that firm, while your new firm’s insurance should cover you for all work you do from the time you join the firm. The only two concerns to affect this would be if you provide any services to clients on your own between the time you leave one firm and join another, or if your old firm fails to maintain continuous coverage after your departure, opening the possibility that you might not be covered if a former client sues after their last policy expires.
You retire from practice altogether:
When you retire, it is most important to maintain some extended coverage because you could find yourself hit with a lawsuit several years after your last day at work, depending upon the nature of your practice and limitations periods in your jurisdiction. Most carriers will offer a very reasonably-priced extended reporting period for retiring attorneys provided they have been insured with that carrier for some specified period of time. Thus, if you’re planning to retire within the next five years, it’s not in your best interest to switch from carrier to carrier chasing lower prices or scaling back coverage; what you think you’re saving could cost you more later on if you can’t find the tail protection you’ll need in retirement.
Another important risk to consider in retirement: if you are retired, stay retired, or you could jeopardize whatever extended coverage you put in place. Your extended reporting period won’t speak to claims arising from work you do after your last policy expired, and that new work may even void your retirement endorsement terms.