Do I Need Tail Coverage?

The most frequently asked question we receive in the Underwriting Department is “do I need tail coverage?”  This, of course, leads to questions about what it is, how does it work, and what is the cost. Every attorney’s situation is different, and you should speak with one of our underwriters about your specific situation.  With that said, let’s review the basic concepts of tail coverage to help you answer this question.  

What is an ERE?

Tail Coverage is the common name for an Extended Reporting Period or Extended Reporting Endorsement (ERE) and is common with claims-made and reported coverage policies.  Its purpose is to extend the period of time you have to report a claim (if one were to arise) after the policy has been cancelled, or the policy has expired, or you have been removed from the policy.  To have coverage for claims under a claims-made and reported type policy, you first need to be covered under an active policy or have an ERE and report the claim within the extended reporting period.

Who needs an ERE?

A sole practitioner should consider obtaining an ERE when closing their practice to work at another firm, retiring, or even when leaving private practice to work in-house or pursue a different career.  A firm that is dissolving should consider obtaining an ERE to extend the reporting period for the firm and any of the named attorneys.  This eliminates issues as to whether the firm or any individual attorney can secure coverage for legal services rendered prior to the dissolution.

Who may not need an ERE?

The answer is an individual attorney that works in a multi-attorney firm, since the policy will most likely stay active for the remaining member(s) of that firm.  In this scenario the attorney that is leaving the firm can rely on the policy language, more specifically the definition of an “Insured” which includes: “Any lawyer who was a stockholder, partner,member or employed lawyer of the Named Insured at the time of the act(s) or omission(s) that are the subject of the claim or suit, but only to the extent that such act(s) or omission(s) were within the scope of and in furtherance of duties for the Named Insured.” An active policy includes coverage for former attorneys of the firm, as the cost for the ERE may be cost prohibitive for an individual attorney or simply not available due to high coverage limits.

How do I obtain an ERE?

You must send Lawyers Mutual – Underwriting a written request for quotes for the ERE within 30 days of cancellation of the policy, expiration of the policy, or your removal from the policy.  We offer a 4-year (Limited) or an Unlimited endorsement.  The “4 years” or “Unlimited” refers to the time frame you would have to report a claim, after the policy has been cancelled, or the policy has expired, or you have been removed from the policy. You have up to 60 days to pay the additional premium owed, if any.

What is the cost for an ERE?

The cost will depend on whether you are purchasing an optional ERE or qualify for a discounted ERE or complimentary ERE.  The cost to purchase a 4-year ERE is 200% of your expiring premium, and the cost to purchase an Unlimited ERE is 300% of your expiring premium.  This is the same for an individual attorney or for a firm.  An attorney may qualify for a discounted ERE or complimentary ERE if he or she has been insured with us, consecutively, for at least 10 years, and is retiring, deceased, 100% disabled, or leaving private practice.  The cost to purchase an Unlimited ERE is 100% of your expiring premium, and the 4 year ERE is complimentary or at a $0 cost. Premiums for an ERE are paid prior to the endorsement is issued and in one lump sum, there are no payment plan options.

Conclusion

Extended Reporting Endorsements are important tools to plan for as part of your practice to extend your rights to a defense and indemnity for claims that may be made after your policy ends.