1. Forms
2. MP
3. MP-28-16

What the form is

The MP 28 16 Extended Reporting Period endorsement is designed to be attached to a claims-made liability policy. Its primary function is to activate and define the terms of an Extended Reporting Period (ERP), often referred to as "tail coverage." When a claims-made policy is cancelled, non-renewed, or replaced with an occurrence policy, an ERP allows the insured a specified additional time to report claims that arise from wrongful acts committed before the policy's termination date but after any applicable retroactive date. This endorsement is crucial because a standard claims-made policy only covers claims that are both made and reported during the policy period (or sometimes a brief automatic reporting period immediately following).

Classes of business it applies to

This endorsement is applicable to any individual, business, or professional service that holds a claims-made liability insurance policy. It is commonly used with:

• Professional Liability (Errors & Omissions - E&O): For professionals like lawyers, accountants, architects, engineers, consultants, and technology service providers. For example, a law firm that is dissolving would purchase an ERP to cover claims arising from legal services provided in the past.
• Directors and Officers (D&O) Liability: For public, private, and non-profit organizations to protect their leadership from claims alleging wrongful acts in their managerial capacity. For instance, if a company is acquired and its D&O policy is cancelled, an ERP would be essential.
• Employment Practices Liability (EPLI): For businesses to cover claims related to employment-related wrongful acts such as discrimination, harassment, or wrongful termination. A company ceasing operations would need an ERP for prior employment practices.
• Other specialty claims-made policies: This can include certain types of cyber liability, healthcare professional liability (medical malpractice), and fiduciary liability policies. A retiring physician would need an ERP for potential malpractice claims from services rendered during their active practice.

Special considerations

Several important factors must be considered when dealing with the MP 28 16 endorsement:

• Activation and Premium: The ERP is not automatic. This endorsement must be formally added to the policy, the effective date and the specific extended reporting period must be entered on the endorsement schedule, and the required premium must be paid for the ERP to take effect.
• Non-Cancellable: Once the premium is paid and the ERP is in effect, it generally cannot be cancelled by either the insurer or the insured.
• Cost: The premium for an ERP can be substantial, often ranging from 75% to 300% (or more) of the expiring annual policy premium, depending on the length of the ERP selected and the risk profile.
• Scope of Coverage: The ERP only allows for the reporting of claims stemming from wrongful acts that occurred prior to the end of the policy period and on or after the retroactive date. It does not cover wrongful acts committed during the ERP itself. The terms, conditions, and exclusions of the expiring policy generally continue to apply to claims reported during the ERP.
• Duration: The endorsement will specify the length of the ERP, which can vary (e.g., one year, three years, five years, or sometimes an unlimited period, though the latter is less common and more expensive).
• Triggering Events: The option to purchase an ERP is typically triggered by specific events, such as policy cancellation or non-renewal by the insurer or the insured, or the replacement of a claims-made policy with an occurrence policy.

Key information for agents and underwriters

Agents and underwriters should be mindful of the following when working with the MP 28 16:

• Pricing: ERP premiums are based on the expiring policy's rate, the length of the ERP, the nature of the insured's operations, historical claims experience, and the specific type of liability coverage.
• Risk Assessment: For underwriters, the decision to offer an ERP, and at what terms, involves assessing the likelihood of future claims arising from past acts. This includes reviewing the insured's business stability, industry risks, and prior claims history. The 05 09 edition of this endorsement allows it to be attached to Management Protection Policy coverage forms MP 00 08 (Management Protection Policy For Not For Profit Organizations) and MP 00 09 (Management Protection Policy For Private Companies), in addition to MP 00 07 (Management Protection Policy).
• Counseling Clients (Agents): Agents have a critical role in explaining the function of claims-made policies and the importance of an ERP upon policy termination. Failure to secure an ERP can leave an insured with a significant uninsured exposure for prior acts. Agents should document their client's decision whether to purchase an ERP.
• Underwriting Guidelines: Underwriters must ensure the endorsement schedule is completed accurately with the specific ERP duration and effective date. They should also confirm that the underlying policy (e.g., MP 00 07, MP 00 08, MP 00 09) clearly outlines the conditions under which an ERP may be purchased. The ERP's terms should align with the expiring policy unless explicitly modified by the endorsement.