Tail coverage is the casual term used to replace Extended Reporting Policy (ERP). Originally insurance companies called these Extended Reporting Endorsements (ERE), but the tend has moved to ERP.
An ERP is a coverage provision stated in the policy that primarily deals with the death, disability or retirement of an insured. Since professional liability policies are issued today in a claims made form, there must be a policy in place at the time of the claim in order for there to be a policy to report it to. This then requires the insured to keep continual cover in place. If an insure has died or has become disabled or retires from the practice, it would be unreasonable to expect the estate or the retired insured to continue to purchase a policy. This is where an ERP comes into play.
An ERP allows the insured, for a one-time premium, to purchase an extension from the date of purchase into the future the ability to report claims to the last insuring carrier. Each carrier has there own terms, but in general, extensions can be purchased for one year, two years, three years, five years or unlimited. The cost of the extension is based on the last policy’s premium and then a multiplier is used based on the length of the extension, the more years of coverage the greater the multiplier.
The statute of limitations should not be the factor in how many years of extension should be considered as the statute does not begin to run until the reasonable date of discovery. Therefore, it is more important for the insured to consider the areas of practice that they worked in as some practices areas have a long length of discovery by nature.