Frequently Asked Questions

Q: Why should I be concerned with the financial ability of my insurer?                                                                                 A: With the federal bailout of the insurance giant American International Group, financial due diligence can only go so far toward assuring you that the insurance you purchase will be available when you need it most, at the time of a claim.  California admitted insurers participate in the California Insolvency Guarantee Association.  This acts like a financial back-stop to an insurer going through insolvency and liquidation by protecting the integrity of the insurance industry through assessments to other insurers.                                                                                       

Q: Why do I need Prior Acts Coverage?
A: The professional liability policy is written on a "claims made and reported" basis. Unlike other liability insurance policies, the claims-made policy requires that the claim happens and is reported within the policy period.  To extend the backward reach of the policy, the concept of prior acts and retroactive coverage answers the need to report a claim.

Q: What is a "Tail" and should I look for a "Free" Tail?
A: In a claims-made and reported policy, when the expiration date is reached, insurance protection ceases and is replaced by a new policy with the same prior acts exclusion date thus adding another step to the just expired policy added onto the current policy.  When the insured reaches the end of their career and chooses to retire, the claims-made and reported policy offers a policy tail that allows for the reporting of claims that have happened but have yet to be reported. 

The technical description of the tail is an Extended Period of Reporting and can be provided most commonly by an endorsement to the last claims-made and reported policy purchased by the insured.  An EPR endorsement does not extend the expiration date of the last policy, just the ability to report a claim that happened before the expiration date. 

The cost of an EPR endorsement is outlined in the policy and may contain a provision for a period of "free" tail coverage.  Just like lunch, a tail extension is not free.  Comparatively shopping the premiums for a policy containing a "free" tail are often substantially more costly than a policy containing a more standard charge for the EPR endorsement.

Related resources

• Not Far From The (Apple) Tree - Ask a question or make a comment about professional liability insurance.