Tail Coverage: Is The ALIGNED Term Of The Day

Tail Coverage – A Definition

Tail coverage is a provision found within a claims-made policy that permits an insured to report claims that are made against the insured after a policy has expired or been canceled, if the wrongful act that gave rise to the claim took place during the expired/canceled policy. It often requires that the insured pay additional premium, but some policies will include limited (i.e. 60-90 days post expiration) automatic extended reporting periods for no additional premium.

Tail Coverage Explained

For example, assume that a claims-made policy with a January 1, 2015-2016, term contains tail coverage with a term of January 1, 2016-2017. Also assume that the insured did not renew the policy when it expired on January 1, 2016. Under the tail coverage, the insured will be able to report claims to the insurer during the January 1, 2016-2017, period of tail coverage, provided the claim resulted from a wrongful act that took place during the expired January 1, 2015-2016, policy term.

Tail coverage, can be considered synonymous with run-off insurance and or used interchangeably with extended reporting period provisions.  It includes several important features:

1. The tail coverage applies only if the wrongful act giving rise to the reported claim took place during the expired/canceled policy period. Thus, there is no coverage available for wrongful acts if committed  during the period of tail coverage.
2. Tail coverage applies for a limited time period, generally 1 year.
3. Purchasing tail coverage for a specific time period does not reinstate the policy’s aggregate limit of liability.

See also Claims-made policy; Coverage trigger; Extended reporting period;  Errors and omissions (E&O) insurance; Nonprofit directors and officers liability insurance; Claims-made coverage trigger; Run off provision

An ALIGNED Advocate can provide expert guidance about tail coverage, claims-made insurance policies as well as risk management best practices for your organization. Talk to one of our advocates today about how we can help you secure the best products, services and insurance solutions for your business.

About ALIGNED

ALIGNED specializes in delivering insurance and risk management solutions exclusively to Canadian businesses. Through our 18 points of differentiation and expertise, we deliver unmatched value to our growing portfolio of clients from all industries that range from small to large organizations. We offer all of the following management liability products:

• Board Insurance / Directors and Officers (D&O) Insurance
• Employment Practices Liability (EPL) Insurance
• Fiduciary Liability Insurance
  Other:
• Property Insurance – including Business Interruption & Extra Expense
• Machinery Breakdown / Boiler & Machinery Insurance
• Course of Construction (COC)
• Wrap-up Liability Insurance
• Commercial General Liability / CGL Insurance
• Pollution Liability Insurance
• Commercial Automobile & Fleet Insurance
• Umbrella Liability Insurance
• Cyber, Hacking & Privacy Liability Insurance
• Crime / Fidelity / Employee Theft Insurance
• Professional Liability / Errors & Omissions (E&O) Insurance
• Kidnap & Ransom Insurance
• Representations & Warranty Insurance
• Trade Credit
• Surety & Bonding