What is Bilateral Extended Reporting Period Provision
Bilateral Extended Reporting Period Provision is a reporting period extension provided to policyholders in claims-made liability insurance policies. These provisions apply to claims made after the retroactive date, and after the policy has been canceled, non-renewed, or changed to a different type of liability policy.
Also called two-tail or two-way extended reporting provisions.
- Bilateral extended reporting provision allows business owners to report claims after a claims-made policy has expired.
- The reporting period is generally extended for a finite period of time.
- The coverage extension is generally offered free of cost when it is offered by the insurer, but costs more in premium when it is requested by the insured.
Understanding Bilateral Extended Reporting Period Provision
Businesses that purchase claims-made liability insurance may ultimately not continue to use the same policy for a number of reasons. The policy may be canceled or not renewed; it may be replaced with a different type of liability policy, such as an occurrence policy; or it may be replaced with a claims-made policy with a different retroactive date, which is more beneficial to the policyholder because it covers claims from a longer period of time. These businesses, however, will want to make sure that they are covered from claims at all times.
A claims-made policy provides coverage when a claim is made against the policy, regardless of when the claim event took place. A claims-made policy is most likely to be purchased when there is a delay between when claims are filed and when they occur. Business insurance policies are often offered as either a claims-made policy or an occurrence policy. While the claims-made policy provides coverage for claims when the event is reported, the occurrence policy provides coverage when the event occurs.
In some cases, the extended reporting period coverage is not an option that can be added by the insured, and instead is an option that can only be added by the insurer. The insurer will provide coverage over an extended reporting period, if the insurer is the party that cancels the policy or does not allow it to be renewed. This is referred to as a one-way tail. This differs from a bilateral extended reporting period provision, in that the insured does not have the option of purchasing the extension.
Bilateral extended reporting period coverage is usually provided free-of-cost, if the insurer is the party who decides not to let the policy renew, cancels the policy, or changes the type of liability policy. A supplemental or optional extended reporting period may be offered by the insurer at the request of the insured, and is likely to cost the insured more in terms of premium to be paid.
The bilateral extended reporting period provision is added to the policy contract, and allows the policyholder to continue to report claims to the insurance company. The reporting period is typically extended for a finite period of time, such as 60 days.
Example of Bilateral Extended Reporting Provision
Vicky owns a small business and the claims-made insurance policy for her business expires on January 2, 2020. She forgets to renew her policy until a later date. Meanwhile, a claim is filed against her business on January 26, 2020.
The insurer has offered an extended reporting period of 60 days to her in the policy. This means that she can report claims filed against her business up to March 2, 2020. Because January 26 falls within that period, the insurance company is responsible for honoring the claim.