“Tail” coverage – the Basics:
“Tail” insurance or “tail” coverage is shorthand for an Extended Reporting Endorsement. Your OBLIC policy provides coverage on a claims-made and reported basis. This type of policy provides coverage for claims which are made and reported during the applicable policy period of an in-force policy. Coverage under a claims-made and reported policy typically ends when the policy expires or is cancelled.
However, this is where “tail” coverage provides enormous benefit. A “tail” endorsement can be purchased at the end of a policy term which extends the time period within which a claim may be reported concerning an alleged act, error or omission that occurred during a period in which the policy previously provided coverage. This endorsement is commonly called “tail” coverage because it may take a number of years to discover malpractice, so the claim is said to “tail” or follow after the act, error or omission.
A tail endorsement may be needed in these situations:
- Retiring and leaving the practice of law
- Entering government service
- Changing law firms
- Merger of law firms
- Dissolution of a law firm
If you wish to purchase a tail endorsement it is imperative that you ask your OBLIC Underwriter about it immediately at the termination of your current policy, as the option is only available for a limited time after the expiration of the policy term.
The tail endorsement does not apply while winding up an active practice.
The tail endorsement only extends the period of time in which a claim may be reported. It does not cover any active practice of law. If a lawyer is actively providing legal services to any client (including an active case), a current policy is needed to provide coverage.
If a lawyer is actively practicing fewer hours or winding down the practice, it may be possible to purchase a part-time policy. The purchase of a part-time policy should be carefully discussed as it may impact “tail” coverage purchased in the future.
If the law firm the lawyer is leaving remains an ongoing entity, consider if a tail endorsement is needed.
If the firm remains as ongoing entity insured by OBLIC, former partners, shareholders or members of the firm will remain as insureds under the firm’s policy for their alleged acts, errors or omissions while with the firm. If a firm dissolves or otherwise terminates coverage, “tail” coverage purchased by a retired partner may provide that individual lawyer protection against a claim made after retirement. However, when a law firm dissolves, a firm “tail” endorsement should be seriously considered. Otherwise, former insureds who did not purchase a tail upon their leaving the firm would have any potential coverage extinguished upon the expiration or termination of the firm’s policy.
The tail endorsement does not cover time periods when lawyer did not have insurance.
There is generally no coverage for claims arising out of legal services provided over any period of time when the lawyer practiced without malpractice insurance. This is often referred to as a gap in coverage. As a reminder, “tail” coverage only extends the ability to report claims that would otherwise be covered by the policy except for its expiration.
Time periods available for tail coverage.
OBLIC offers a “tail” endorsement to extend the reporting period for 1 year, 2 years, 3 years, or for an unlimited number of years. The appropriate length of tail coverage depends on the attorney’s area of practice and the potential application of the new Ohio statute of repose for legal malpractice claims. The one-year Ohio statute of limitations for legal malpractice claims begins to run upon the later of the discovery of the error or the end of the representation. Within some areas of practice, a potential error can lay dormant for years, for others, it is discovered in quick order. The Ohio statute of repose places a maximum limit of four years within which to file suit (although up to five years in certain limited circumstances) from the date of the act, error or omission, regardless of whether the error was discovered within that period. We do not currently know whether the statute will be interpreted to apply retroactively or prospectively only, so our recommendation regarding which tail option to buy is to generally assume a longer period of time may be available for claimants to bring undiscovered claims arising out of acts, errors, or omissions predating the effective date of the statute of repose, June 16, 2021. Acts, errors, omissions after that date should be clearly governed by the statute of repose.
Considerations for purchasing a tail endorsement.
- Deciding whether to purchase a “tail” endorsement and choosing the right term for a “tail” endorsement depends on factors unique to each lawyer and law firm.
- A “tail” endorsement can provide “peace of mind” that the lawyer will have continuing coverage for potential claims made and reported after retirement or other career changes without worrying about the continued viability of the firm.
- A “tail” endorsement can provide a measure of protection for the assets of the lawyer.
- Sale of Practice agreements often require that a lawyer maintain legal malpractice insurance. If the lawyer is retiring and leaving the practice of law, the purchase of a “tail” endorsement may be necessary to fulfill that requirement.
You may also find these resources helpful:
Plan to discuss any questions about tail coverage with your OBLIC Underwriter to determine the options available and the premium involved. As always, if you have any questions, please contact us. We are here to help.
|Gretchen Mote, Esq
Director of Loss Prevention
Ohio Bar Liability Insurance Co.
Email: [email protected]
|Monica Waller, Esq.
Senior Loss Prevention Counsel
Ohio Bar Liability Insurance Co.
Email: [email protected]