Many people think that there is a separate policy issued once “Tail” is purchased on a Lawyers Professional Liability Insurance Policy. This is not the case. Generally the endorsement is just one sheet of paper and only one or 2 paragraphs long. There is not a separate policy that is issued. The Extended Reporting Period Endorsement (ERP/Tail) is attached to the last in force policy that was in force at the time coverage was terminated. Other than amending the reporting period, for a specified time from up to unlimited, the endorsement does not normally amend any coverage or policy terms.
Although I know of no insurance carrier that we increase Lawyers Professional Liability Insurance limits on an ERP), there are a few malpractice insurance carriers that are willing to reduce liability limits for the ERP Endorsement. This will reduce the cost of the ERP.
The caution on reducing the limits is that once reduced, the law firm has reduced limits for any claim that might be reported during the ERP period, even though the law firm may have had much higher limits in the past. The firm may have paid for the higher limits for many years because of the type of work or clients being handled. If a past client now brings an action for work done in prior years, the firm will now have an ERP with limits that might be inadequate.
The other problem is the aggregate attorney malpractice policy limit. During annual policy periods, the aggregate policy limits normally do not come into play as they are replenished annually. The firm must realize that the ERP limits are not replenished annual, but are for the terminated policy plus the ERP length that the ERP was purchased for. If the law firm is hit with multiple claims in the ERP period, the multiple claims may exhaust the aggregate policy limit. The aggregate limit may extend possibly for many years.
So a law firm may save some money up front on buying a reduced limit ERP. Once the aggregate malpractice limit is exhausted the firm will no longer have coverage as the obligation by the malpractice insurance carrier has been met.