Errors and Omissions Insurance in Texas

What does it meant that an E&O policy is a “claims made” policy?

"Claims made" policies are a common kind of E&O policy. These policies look at when a claim is filed when determining whether the claim is covered. This is distinct from basing coverage on when an incident happened.

So long as a claim is filed when a claims made policy is in effect, the claim will likely be honored (provided it meets any other applicable requirements). This can be especially helpful if it’s difficult to know the precise timing of when an error was made.

As with almost any insurance item, however, there are some common restrictions to "claims made" policies. Most notable are “retroactive date” and “tail coverage:”

• Retroactive Date: Usually marks the earliest date an error is eligible for a subsequent claim. Errors occurring before this date typically aren't covered, even if claims are filed when the policy is in effect.
• Tail Coverage: Usually extends the time frame in which claims can be filed, so they can be filed past the policy’s end date. Claims made during this extended period are typically eligible for coverage. Sometimes tail coverage can provide coverage for the remainder of a professional’s life, in case there’s no statute of limitations on certain lawsuits that could be filed over the professional’s work.

A specialized E&O insurance agent can help professionals understand these and other terms found in E&O policies.