You faithfully purchase an E&O policy every year, never allowing your coverage to lapse. What happens, though, when a claim is made regarding services rendered when an expired policy was in effect? Without an insurance tail, the legal fees and any settlement monies granted by the court become your responsibility. An insurance tail coverage definition is a provision that allows claims to be reported for a certain amount of time after the E&O policy that was active at the time of the alleged transgression is past its expiration date.
Most E&O policies are claims-made policies. That means that not only does the claim have to be made against the one who holds the policy but also that it must be made during the time the policy is in effect. If a claim is made outside those parameters, it is generally not covered by the policy. That is where your tail coverage comes in handy. It allows a little leeway with at least one, if not both, of the claims stipulations required by the insurer. It is important to have tail coverage tacked on to each E&O policy you purchase, and it is equally important to understand each insurance tail coverage definition so that you know your business has liability coverage, no matter what.