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
during the expired/canceled policy. Tail coverage requires that the
insured pay additional premium.
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, which is synonymous with extended reporting period provisions,
includes several important features: (1) the 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 tail 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.