Are you buying or selling an agency, reducing operations or shutting down? If so, you should consider tail insurance. A standard errors and omissions policy will protect you while it is in force, but tail insurance can maintain that protection even after you’ve left an agency or project.
What Is Tail Insurance?
Tail insurance extends the protection you would normally expect from your errors and omissions coverage. This can be critical when you are leaving an agency, ceasing a part of your operations, or acquiring a new agency, because there is no guarantee that mistakes from the past will not surface later on. Tail insurance can provide protection for professional liability claims, giving you resources to cover legal defense costs and damages.
There is no one set of best practices for designing good tail coverage, but there are a number of considerations to keep in mind.
When buying, insist that the seller have at least a 3-year tail in place.
If you are reducing services, make sure to get tail coverage that will address negligence claims.
As a seller, the longer the tail, the greater your protection against claims.
No matter what your coverage, it is also best to purchase a bilateral tail, which will offer you coverage whether you or your carrier cancels a policy for reasons other than default. Tail coverage will help you to start a new chapter with confidence.