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Question from Law Firm:

Law Firm’s Managing Partner states, “My Travelers Lawyers Professional Liability Insurance Agent tells me that it is going to cost 3 times expiring to buy an Extended Reporting Period Endorsement (ERP or Tail).  Our law firm is merging with another firm and is required to have an ERP.  I am shopping for a better price.”

Response:

Right, wrong or indifferent, the best option for purchasing a Lawyers Professional Liability Insurance ERP is through the carrier that is on the risk at the time the coverage is terminated.  In this particular case the Travelers policy for 3 times expiring buys an “Unlimited” Extended Reporting Period endorsement.   Each Professional Liability Insurance carrier has different factors that are used to purchase the ERP endorsement and not all offer the same extensions of the reporting period.   But the concept for the cost is the same; it will be a multiple of the premium in force at the time coverage was terminated.  The “right” for the Law Firm to purchase an ERP is generally spelled out on the declarations page, in the body of the policy or an endorsement that is attached to the policy when it was written.  The Lawyers professional Liability ERP terms are non-negotiable with the incumbent carrier.

While there are other options to purchasing the Lawyers Professional Liability Insurance ERP they are generally much more expensive, tightly underwritten, with lesser terms and conditions.  As another carrier will not attach an endorsement to the expiring policy, these carriers will write what is commonly referred to as a “Run Off” policy.  Lawyers Professional Liability Insurance Run Off policies are generally written on an annual basis and may or may not be renewed at the discretion of the insurance carrier.  The carriers that write this coverage are mostly “Surplus Lines” or “non-admitted” insurance carriers.

Lawyers Professional Liability Insurance “Run Off” policies do have their place, but it is not a good replacement for purchasing the ERP from the incumbent carrier.  Generally the one year cost of the “Run Off” policy will be as much as the cost of a multiyear ERP endorsement.  The Lawyers Professional Liability Insurance ERP endorsement, once in place cannot be cancelled.  But an annual Lawyers “Run Off” may or may not be renewed.

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