To appreciate the need for tail coverage or in more proper terminology, “extended reporting endorsement” (ERE), attorneys need to realize professional liability coverage is a claims-made policy and not an occurrence policy. A claims- made policy will provide coverage for alleged actions, which occur during the time the policy, is in effect as long as a policy is still in effect covering those prior acts when the claim is made or reported. In other words, the coverage provided in a claims-made policy ends when the coverage terminates.

The significant date in a claims-made policy is the date the claim is made (first reported) not the date the incident occurred. Further, the act has to occur after the policy’s prior acts date. The prior acts date is usually the commencement date of the first professional liability policy purchased as long as there was not a gap in coverage. Professional liability policies afford coverage for one year and in order for an attorney to have coverage in force at all times, a policy must be obtained every year. Continuity of coverage is paramount in claims-made coverage. What attorneys often overlook is the potentially harmful effect brought about by what is normally a substantial interval between the alleged commission of a negligent act and the eventual first assertion of the claim stemming from the alleged negligent act.

A legal malpractice claim does not accrue until the error is discovered or should have been discovered by the client. Stephens v. General Motors Corp., 1995 OK 114, 905 P.2d 797, 799. Remember, for example, a client’s minority tolls limitations periods or an allegation the attorney fraudulently concealed the cause of

action from the knowledge of the client will toll the limitations period. Depending on the facts, the limitations period could be tolled by the doctrine of continuing representation. The attorney’s potential exposure to a claim can sometimes span a number of years before the alleged negligent act gives rise to the claim. The simple fact and perhaps the simple danger, is the risk of a claim being asserted long after a claims-made policy has come to an end. As indicated above, it can sometimes be difficult to predict when a client will assert they became aware of a potential negligent act and follow-up on that assertion. Moreover, considerable defense fees can be incurred in defending a claim at a time when the attorney’s disposable income may be proportionally smaller than when the attorney was actively practicing law.

An attorney can only purchase professional liability insurance while in active practice. This poses a problem for an attorney who is going to go into retirement, to become a judge, to change firms or to enter a non-legal profession, as the attorney can no longer purchase coverage if the attorney will no longer actively practice law. The policy affords the option for an ERE (tail coverage) in these situations.

What is an ERE? The purchase of an ERE is not a separate policy, rather, the endorsement extends the terms and conditions of the existing policy and allows an additional period of time in which a claim may be reported to the insurance carrier. The purchased endorsement allows the attorney to report claims to the insurer after the policy has expired or been cancelled. It is imperative to note under most ERE provisions, the purchase of the endorsement is not one of supplementary coverage or of a separate and distinct policy. This means no coverage will be available for a negligent act or omission which occurs during the time the ERE is in effect. So, if for example, the attorney retired and then performed some work as a favor for a friend, there would be no coverage for that claim under the ERE.

The attorney should be aware ERE is not just important when an attorney leaves the practice of law for retirement, the judiciary or a non-legal profession, it can be important when an attorney changes law firms. Although the new firm may have a professional liability policy, the policy, typically, may only provide coverage for claims made while the attorney is a member of the law firm. The new firm’s policy may not extend coverage for acts prior to the attorney joining the new firm.

Some attorneys, who are leaving the legal profession, feel like there is no need to purchase ERE when they leave an established law firm. The assumption is the law firm would be named in any lawsuit and would be responsible vicariously for any claim that could be made. This assumption may or may not be correct depending upon the factual situation presented. If the attorney has any concern about the longevity of the firm or about the likelihood the firm will continue to purchase professional liability coverage, the attorney should opt to purchase an ERE. Remember, no policy in place at the time the claim is made means no coverage.

Another issue arises when the attorney decides to semi-retire and the attorney purchases a policy with reduced limits in order to save on expenses. When the attorney retires, for purposes of the ERE, the attorney will retain the policy limits which were in place on the last policy of the attorney’s career. The attorney should consider whether the premium savings on the reduced limits of liability would be worth the potential exposure in retirement. Remember, all claims reported under the ERE will be subject to the available residual limits of the last policy in force and this limit may not be enough coverage. The limits, whatever they are, are for the entirety of the ERE and will be reduced by any defense cost or indemnity payments made on behalf of the attorney.

The period in which an attorney can purchase an ERE is very limited. Most policies allow a 30-day window, which starts running on the effective date of the expiration or termination of the existing policy. This window is the only chance to purchase an ERE. When the time period expires, the opportunity is gone.

The extent of the ERE or more precisely the span of time under which a claim may be reported commonly varies from one year, three year, or to unlimited reporting periods. The unlimited reporting period would be the most desirable, if available, particularly for attorneys who have written wills or prepared real estate documents during their practice.

Finally, should the unforeseen happen such as the unexpected death or disability of an attorney still in practice, an ERE can still be obtained. If the attorney dies, an ERE can be purchased in the name of the deceased attorney’s estate if timely pursued in accord with the policy provisions. A legal malpractice cause of action can be brought after an attorney’s death. The right survives resulting in the attorney’s estate being named as the defendant. Loveman v. Hamilton, 66 Ohio St. 2d 183, 420 N.E.2d 1007-08. Attorneys, who by nature exert substantial effort to protect their clients, should exercise the same effort on their own behalf. Best practices would be for the attorney to have written instructions to alert the heirs to the procedure and need for an ERE to protect the attorney’s estate and family.

-Alison Cave
Vice President, Claims
Oklahoma Attorneys Mutual Insurance Company