Form CG 27 10: Extended Reporting Period For Specific Accident(s), Product(s), Work Or Location(s) (Claims-Made Form)
1. What the form is
The CG 27 10 endorsement is used with a Commercial General Liability (CGL) policy written on a claims-made basis. Its primary purpose is to provide an extended reporting period (ERP), often called "tail coverage," for claims arising from specific incidents, products, work, or locations that are explicitly listed in the endorsement's schedule. This is a crucial distinction from a general ERP that might cover all of the insured's operations. The CG 27 10 allows the insured to report claims after the policy period has ended, provided the claim originates from one of the scheduled items and the actual bodily injury or property damage occurred after the policy's retroactive date but before its expiration. It's important to note that this endorsement modifies the standard extended reporting period provisions found in the base claims-made CGL form (like CG 00 02).
2. Classes of business it applies to
This endorsement is not limited to specific industries but is particularly relevant in situations where an insured has identifiable, high-risk exposures that they want to ensure have tail coverage, even if they are discontinuing broader operations or switching to an occurrence policy. Examples include:
- Contractors: A contractor completing a large, unique project (e.g., building a specialized manufacturing plant) might use this endorsement to secure an ERP specifically for that project if they are retiring, selling the business, or changing their insurance structure. This ensures that if a defect in that specific project's work leads to a claim years later, they still have a window to report it.
- Manufacturers: A company that produced a specific product line which is now discontinued, but for which long-tail liability (claims arising long after manufacture/sale) is a concern. They might use CG 27 10 to create an ERP solely for claims related to that discontinued product line. For instance, a toy manufacturer that produced a particular toy with a component later found to be problematic.
- Property Owners/Developers: An owner who sold a specific property but wants to ensure tail coverage for any latent defects or incidents related to that particular location that occurred during their ownership and under the claims-made policy.
- Businesses undergoing mergers or acquisitions: The selling entity might use this endorsement to carve out specific past projects or products for an ERP, providing a cleaner break for the acquiring company while still managing its own historical liabilities.
3. Special considerations
Several important factors must be considered when using CG 27 10:
- Specificity is Key: The endorsement is only effective for the accidents, products, work, or locations precisely described in the schedule. Any claim arising from an item not listed will not be covered by this specific ERP.
- Not a Substitute for Full Tail: If an insured needs broad ERP coverage for all their operations, a general Supplemental Extended Reporting Period Endorsement (like CG 27 10 when not limited to specifics, or other similar forms) would be more appropriate. The CG 27 10, when used for specifics, is a targeted solution.
- Occurrence and Reporting Window: The bodily injury or property damage must have occurred after the retroactive date and before the policy period ended. The claim itself must then be made against the insured and reported to the insurer as allowed by the terms of the ERP. The ERP only extends the time to report claims, not the timeframe in which the injury/damage itself must occur.
- Premium Cost: Purchasing an ERP, including a specific one via CG 27 10, involves an additional premium. This premium can be substantial, often a multiple of the original policy's annual premium, and is typically fully earned upon inception of the endorsement.
- Requesting the Endorsement: The insured usually has a limited time (e.g., 60 days) after the policy period ends to request and pay for this ERP. Missing this window can mean losing the option for this coverage.
- Interaction with Other Insurance: Some versions of this endorsement may specify that the coverage provided is excess over other available insurance, particularly if the named insured is an additional insured on another policy.
- Aggregate Limits: The endorsement may provide its own set of aggregate limits, or it may state that the original policy's limits apply and are not reinstated or increased. This needs careful review.
Real-world example: A construction company built a unique bridge (Project X) under a claims-made policy. Upon completion, the company decides to dissolve. To protect against future claims specifically from Project X, they purchase a CG 27 10 listing only "Work performed on Project X at [location] completed on [date]" in the schedule. Two years later, a structural issue arises from Project X causing property damage. Because the damage occurred during the original policy period (after retroactive date, before expiration) and was specifically scheduled on the CG 27 10, the claim can be reported under this ERP.
4. Key information for agents and underwriters
- Pricing: Pricing will depend heavily on the nature and perceived risk of the specific items scheduled. An underwriter will need detailed information about the accident, product, work, or location to assess the potential for future claims. Factors include the statute of repose in the relevant jurisdiction, the type of product or work, and any known incidents or potential defects. The premium is often a percentage (up to 200% or more) of the expiring policy's annual premium.
- Risk Assessment: Underwriters must carefully evaluate the "long tail" potential of the scheduled items. For products, this means considering the expected lifespan and potential for latent defects. For completed operations, the quality of work and type of construction are key. For specific accidents, the details and potential for future related claims are paramount.
- Coverage Gaps: Agents must clearly explain the limited scope of this endorsement. If the insured has other exposures not listed, this ERP will not cover them. It's crucial to ensure the client understands that this is not a blanket tail. Misunderstanding this could lead to significant E&O exposures for the agent.
- Underwriting Guidelines:
- Full details of the specific accident(s), product(s), work, or location(s) are required. Vague descriptions are unacceptable.
- Loss history related to the scheduled items is critical.
- The underwriter will consider why the insured is opting for a specific ERP rather than a full tail or an occurrence policy. This might indicate a known issue or a desire to shed a particularly problematic exposure.
- The duration of the ERP being requested will influence the premium. While some ERPs can be of unlimited duration, the underwriter will assess the risk accordingly.
- Ensure the retroactive date of the underlying policy is clearly established and that the scheduled items fall within the covered period.
- Relation to CG 00 02: The CG 27 10 is an endorsement to the CG 00 02 (Claims-Made CGL form). Understanding the provisions of the base policy, particularly Section V - Extended Reporting Periods, is essential as the CG 27 10 modifies these.
Agents should counsel clients on whether this specific tail is the most appropriate solution or if broader coverage is needed. Underwriters need to be diligent in assessing the defined risk being transferred and price it adequately, considering the potential for claims to be reported many years after the policy period for the scheduled items.