What is an extended reporting period on claims-made apartment insurance?

An extended reporting period (ERP), commonly called tail coverage, is a provision in a claims-made insurance policy that extends the time window for reporting claims after the policy expires or is cancelled. Without an ERP, any claim not reported during the active policy period is uninsured, even if the underlying incident occurred while the policy was in force.

Claims-made policies are common for apartment-related coverages including environmental pollution liability, cyber liability, professional liability (errors and omissions for property managers), tenant discrimination liability, and directors and officers insurance. When any of these policies is cancelled, non-renewed, or replaced with an occurrence-based policy, the apartment owner needs to secure an ERP for the expiring claims-made policy.

The ISO Claims-Made provisions distinguish between a basic ERP (typically 60 days, included automatically at no charge) and a supplemental ERP (typically one to five years, available for purchase). The supplemental ERP must usually be elected within 60 days of the policy expiration and is priced as a percentage of the expiring premium, commonly 75% to 200% depending on the length of the tail. A perpetual (unlimited) ERP provides indefinite reporting rights but may cost 200% to 300% of the annual premium.

For apartment owners, the most common situation requiring an ERP is selling a property and cancelling the claims-made pollution liability policy. Environmental claims can surface years after the alleged exposure, so a tail period of at least three to five years is advisable. Similarly, property management companies that lose a management contract should secure an ERP on their professional liability policy to cover claims arising from their management tenure that may not be reported until after the contract ends.