Form CG 27 01: Basic Extended Reporting Period Endorsement
1. What the Form Is
The CG 27 01, Basic Extended Reporting Period Endorsement, is an endorsement used with the Commercial General Liability (CGL) claims-made policy (e.g., CG 00 02). Its primary purpose is to formally provide and activate the Basic Extended Reporting Period (BERP), often referred to as "tail coverage," when a claims-made policy is cancelled, not renewed, when the insurer renews or replaces the claims-made CGL with an "occurrence" CGL policy, or when the insurer advances the retroactive date. This endorsement allows the insured to report claims after the policy period has ended, provided the claim arises from an "occurrence" that took place after the retroactive date and before the policy's expiration. The BERP is typically provided automatically and without an additional charge under specific conditions outlined in the policy.
The BERP has two main components for when it might apply:
- If an "occurrence" is reported to the insurer no later than 60 days after the policy end date, and that incident involves bodily injury or property damage, the BERP extends for five years from the end of the policy for claims resulting from that reported incident.
- For an "occurrence" NOT previously reported to the insurer, the BERP will respond to a claim made against the insured only if the claim is made no more than 60 days after the end of the policy.
2. Classes of Business It Applies To
This endorsement is relevant to any business or professional service that carries a claims-made Commercial General Liability policy. Claims-made policies are common in professions and industries where claims may not be known or reported for a significant time after the service is rendered or the event occurs. Examples include:
- Professional Services: Such as architects, engineers, consultants, and even some medical professionals (though medical malpractice often has its own specialized forms, the concept is similar). For instance, an engineering firm completes a project; a structural issue (the "occurrence") arises during the policy period but isn't discovered and claimed until after the policy expires. If the policy is cancelled or non-renewed, the CG 27 01 would activate the BERP, allowing the firm to report this claim.
- Contractors: Particularly those involved in long-term projects or where defects in workmanship might not manifest immediately. A roofing contractor finishes a job (occurrence during the policy period), and two years later, after the policy has been non-renewed, a leak causes significant damage (claim). The BERP could provide coverage.
- Manufacturers: For products with a long lifecycle where a defect (occurrence during the policy period) might lead to a claim years later. If the manufacturer switches to an occurrence policy or ceases operations, the BERP on their prior claims-made policy is crucial.
- Businesses Ceasing Operations or Being Acquired: When a company with a claims-made policy dissolves or is bought out, the CG 27 01 ensures that a period is available to report claims from past work. For example, if a tech startup with a claims-made CGL is acquired and its policy is cancelled, the BERP would allow claims arising from its prior operations to be reported.
3. Special Considerations
- Automatic Provision: The Basic Extended Reporting Period is typically provided automatically under the conditions specified in the CGL claims-made form (CG 00 02), such as cancellation or non-renewal by the insurer, or if the insurer renews with an advanced retroactive date or switches to an occurrence form. The CG 27 01 endorsement serves to document and activate this existing provision.
- Not New Coverage: The BERP does not cover events that occur after the policy has ended. It only allows for the reporting of claims stemming from occurrences that happened before the policy ended and after the retroactive date. This is a common point of misunderstanding.
- No Reinstatement of Limits: The BERP does not increase the policy's aggregate limits. Claims paid under the BERP are subject to the limits of the expired policy.
- Impact of Subsequent Insurance: The BERP generally does not apply if the claim is covered by subsequent insurance (e.g., another claims-made policy that picks up the prior acts).
- Supplemental Extended Reporting Period (SERP): The BERP is "basic." Insureds often have the option to purchase a Supplemental Extended Reporting Period (SERP), which is typically much longer (sometimes unlimited) and requires an additional premium. The option to purchase the SERP usually must be exercised within a specific timeframe after policy termination (e.g., 60 days). The CG 27 01 is distinct from endorsements that provide the SERP.
- Retroactive Date is Key: Coverage under a claims-made policy, including its BERP, is contingent on the "occurrence" happening after the policy's retroactive date.
Real-world example: A consulting firm has a claims-made CGL policy from January 1, 2022, to January 1, 2023, with a retroactive date of January 1, 2020. The insurer decides not to renew the policy. In February 2023, a former client sues the firm for negligent advice (an "occurrence") given in June 2022. The CG 27 01 would activate the BERP, allowing this claim to be reported and potentially covered, even though the policy expired, because the occurrence happened after the retroactive date and during the policy period, and the claim was made within the BERP's timeframe for unreported occurrences (60 days) or for reported occurrences (5 years if the occurrence was reported to the insurer within 60 days of policy expiration).
4. Key Information for Agents and Underwriters
- Client Education: Agents must clearly explain the function of a claims-made policy, the significance of the retroactive date, and how the BERP (and the option for a SERP) works, especially at the point of sale, renewal, or cancellation/non-renewal. Misunderstanding these concepts can lead to significant coverage gaps.
- Triggering Events for BERP: Underwriters and agents should be clear on what triggers the automatic BERP as per the base policy (CG 00 02), such as insurer-initiated cancellation/non-renewal, renewal on an occurrence basis, or advancing the retroactive date.
- Pricing of SERP: While the BERP is usually automatic and at no additional cost, the optional SERP can be expensive, sometimes 100% to 200% or more of the expiring annual premium. This should be communicated to insureds well in advance if a claims-made policy is likely to terminate.
- Risk Assessment: For underwriters, the potential for claims during the BERP is part of the overall risk profile of a claims-made policy. Industries with long-tail exposures (e.g., construction, professional services) warrant careful consideration of the retroactive date and the potential need for robust tail coverage discussions.
- Coverage Gaps: A critical role for agents is to identify potential coverage gaps when an insured is moving from a claims-made policy. If an insured cancels the policy mid-term or if the policy is cancelled for non-payment of premium, the conditions for the automatic BERP might differ or the option for a SERP might be affected. It's crucial to ensure continuous coverage or adequate tail protection.
- Documentation: The CG 27 01 endorsement provides clear documentation that the BERP is in effect. This is important for both the insurer and the insured for record-keeping and claim handling.
- Relationship to CG 00 02: The CG 27 01 doesn't exist in a vacuum; it directly relates to and modifies (by activating provisions within) the CG 00 02 (Claims-Made CGL Coverage Form). Understanding the mechanics of Section V – Extended Reporting Periods in the CG 00 02 is essential.