Friday, May 17, 2013

What to consider when thinking about Mergers, Acquisitions & Transitions when your insurance is on a claims-made policy

If your organization is going through any of changes mentioned here, we want to emphasize the importance of obtaining an Extended Reporting Period (ERP) endorsement. You will often hear this referred to as a “Tail” and it applies to certain liability policies, such as Directors & Officers (D&O) and Professional. The purpose of the ERP is to extend the time you can report a claim after you have discontinued your policy. Otherwise, you might not have coverage for a claim reported after the end of your policy. The ERP length of time will vary by insurance company, often from 1 year to 5 years, however, in some cases you may be able to secure an unlimited time period.

Generally, insurance companies provide Professional Liability, as well as D&O on a Claims Made form, so you will need to check with your Broker to be sure. If your coverage is on an Occurrence form, you won’t have to worry about an ERP.

So if your organization is merging or being acquired by another organization or your closing down your operations you may not automatically be covered and an ERP endorsement could be necessary. Don’t dismiss the importance of purchasing an ERP. There are many circumstances where directors & officers, including executive directors, could be drawn into litigation, even years after operations have been discontinued. You don’t want to find out after the fact, that you have no insurance coverage because you didn't purchase an Extended Reporting Period.

If you have any questions or would like to discuss your situation further, please do not hesitate to give us a call. We are here to assist you with your insurance needs and concerns.

Directors & Officers Liability vs. Professional Liability

Directors and Officers (D&O) insurance is often confused with Professional Liability, the two are not synonymous. They cover different circumstances and it is important to evaluate whether you need one or the other …or both!

D&O Liability protects your organization’s directors, officers or senior executives from lawsuits and judgments that arise due to poor management decisions committed in good faith. Which may include employment practices.

Professional Liability insurance could be defined as liability for the failure to use the degree of skill expected of a person in a certain field. Also known as negligence, malpractice or errors and omissions.