1. Forms
2. MP
3. MP-28-01

What the Form Is

The MP 28 01 Extended Reporting Period endorsement is designed for use with claims-made Management Protection insurance policies. While the main coverage form may describe the possibility of an Extended Reporting Period (ERP), this endorsement is what actually activates that period. It is crucial because claims-made policies only cover claims that are both made and reported during the policy period, or during an ERP if purchased. This endorsement specifies the effective date and the duration of the ERP, allowing the insured additional time to report claims that arise from wrongful acts committed before the end of the policy period.

Classes of Business It Applies To

This endorsement is applicable to entities that have Management Protection policies, which can include a wide range of organizations such as:

• Publicly traded companies
• Private companies
• Non-profit organizations
• Financial Institutions (though some may have specific ERP endorsements)

These policies typically cover exposures like Directors and Officers (D&O) Liability, Employment Practices Liability (EPL), Fiduciary Liability, and other professional or management liabilities. A real-world example would be a private company that is being acquired. If its D&O policy is a claims-made policy and will be cancelled post-acquisition, the MP 28 01 endorsement would allow the company to purchase an ERP to report any claims that occurred prior to the acquisition but are only made after the policy's termination.

Special Considerations

There are several important considerations when using the MP 28 01 endorsement:

• Premium Payment: The ERP is not automatically provided; it must be purchased, and the endorsement does not take effect unless the premium for the ERP is paid.
• Non-Cancellable: Once the ERP is in effect and the premium is paid, it generally cannot be cancelled.
• Scope of Coverage: The ERP does not extend the policy period to cover wrongful acts that occur after the policy period has ended. It only provides an extended window for reporting claims that result from wrongful acts that took place before the policy termination or during any applicable retroactive period.
• Scheduled Period: The length of the ERP (e.g., 12 months, 24 months, 36 months, or longer) must be specified in the endorsement schedule.
• Triggering Events: The option to purchase an ERP is typically triggered by the cancellation or non-renewal of the policy by either the insurer or the insured, or when the insurer renews or replaces the coverage with a policy that has a later retroactive date or changes to an occurrence basis.

For instance, if a non-profit organization decides to dissolve, its board members would want to secure an ERP to protect themselves from claims related to their past decisions that might surface after the organization ceases to exist and its D&O policy is terminated.

Key Information for Agents and Underwriters

For Agents:

• It is crucial to explain the function and importance of an ERP to clients with claims-made policies, particularly when the policy is ending or being replaced.
• Advise clients on the appropriate length of ERP to purchase based on their specific exposures and circumstances (e.g., statute of limitations for potential claims).
• Ensure the client understands that the ERP has an additional premium and is not free.
• Document the offer and the client's decision regarding the purchase of an ERP.

For Underwriters:

• The premium for the ERP is typically a percentage of the expiring policy's premium and is determined by the length of the ERP selected and the perceived risk.
• Underwriting considerations include the insured's industry, claims history, the stability of the organization, and the reasons for policy termination or non-renewal.
• Ensure the endorsement schedule is accurately completed with the ERP's effective date and duration.
• This endorsement is vital for providing a responsible runoff of liabilities under a claims-made policy structure.