DEFINITION of 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.
BREAKING DOWN 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.