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 place 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.