‘Run Off’ Insurance, also known as ‘Tail Coverage’ or ‘Extended Reporting Period Coverage’, is a type of insurance that provides protection to professionals after they have ceased practicing or retired.
When professionals decide to stop their practice or cease operating, they may no longer need an active Professional Indemnity Insurance policy. However, they may still face the risk of liability claims arising from incidents or errors that occurred during their active practice period.
Placing a policy into ‘Run Off’ addresses this concern by extending the coverage for a specific period beyond the cessation of the business.
It is important to consider ‘Run Off’ Insurance for the following reasons:
1. Coverage for Past Work & Long-Tail Claims: When a professional stops practicing, there might be a gap in their liability coverage. Run Off Insurance ensures that claims arising from past work done during their active policy period are still covered, even if those claims are made after you have ceased operating. It is important to keep in mind that, Professional liability claims can take years to surface due to the nature of the services provided, so it is important to consider the potential risks of previous work performed to decide whether ‘Run Off’ Insurance is required.
2. Compliance with Contractual Obligations: Some professional contracts or agreements may require practitioners to maintain coverage for a certain period, even after the work is completed. Run Off Insurance helps fulfil these contractual obligations and avoids potential legal or financial consequences.
3. Peace of Mind: Ceasing practice or retiring can be a major life change for professionals. Having Run Off Insurance provides peace of mind, knowing that they are still protected against potential claims that may arise from past work, allowing them to retire or move on from their practice with reduced concerns about potential liabilities.