How to choose an architects/engineers professional liability ERP (Extended Reporting Period). Assess your risk by considering the statute of limitations, potential for future claims (especially after closing or retirement), and carrier options like free tails or multi-year costs, then select a period (often 1-5 years) that bridges potential coverage gaps, balancing cost (a percentage of your firms expiring premium) with needed protection, and always act within your insurer’s short deadline, typically 60 days after policy expiration.
Key Factors to Consider
Statute of Limitations: Research the state’s statute of limitations for malpractice claims in your profession; the ERP should ideally cover this period to protect against claims filed long after the work was done. Keeping in mind that each State has a different statute of limitations.
Career Stage & Business Status:
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- Retirement/Closing: Essential for covering past work when you stop practicing or close your firm.
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- Changing Insurers: Bridges gaps from old to new policies, especially if you lose prior acts coverage.
Carrier Provisions:
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- Free Tails: Some carriers offer free ERPs for retirement or disability after a vesting period (e.g., years insured with them), review your firm’s policy.
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- Cost Structure: ERPs cost a percentage (e.g., 150-200%+) of your firm’s expiring premium, often a one-time, lump-sum payment.
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- Multi-Year Options: Look for flexible terms, commonly 1, 2, 3 or 5 years.
Coverage Details:
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- Limits & Deductibles: The ERP uses your expiring policy’s limits and deductibles; ensure your policy limits were adequate before the ERP period starts.
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- Prior Acts: Understand your retroactive date; a break in coverage resets it, making an ERP vital.
How to Choose
- Consult Your Agent: Work with your agent to understand your specific policy, carrier options, costs, and state laws.
- Prioritize Stability: Choose a strong, financially stable carrier that can pay future claims.
- Calculate Cost vs. Risk: Decide if paying a substantial lump sum for 3-5 years or unlimited coverage is worth the peace of mind, especially if you don’t qualify for a free tail.
- Act Quickly: You usually only have 60 days post expiration to elect and pay for the ERP; missing this deadline can forfeit coverage.
Refer to the policy form for Victor/CNA to review an example of an extended reporting period https://www.victorinsurance.com/us/solutions/design-construction/architects-engineers.html.
If your firm has any questions about extended reporting periods on professional liability please call, or email, your Professional Underwriter agent for assistance.