Claims Made Bites: Before You Tail Out, Report EVERYTHING – Extended Reporting Periods Do NOT Extend Deadlines for Known Claims

A recent federal court decision in Berkley Insurance Co. v. Caraway serves as a stark reminder that Extended Reporting Periods are not a catch all for claims you received, but forgot to report. The case demonstrates a fundamental misunderstanding insureds can have that can leave them completely uninsured despite having gone the extra mile and purchased tail coverage.

The Core Misunderstanding

Extended Reporting Periods (ERP) are for claims made during the ERP, not for reporting claims that were made during the active policy period. This distinction is critical, and as this case shows, getting it wrong means no coverage.

The Case: A Timing Disaster

The insured is a lawyer who is currently serving a 90-month sentence for embezzling funds from clients and his law firm. A client filed a lawsuit alleging the lawyer owed money under a 2013 sale agreement related to the purchase of a law firm.

Despite the insured’s criminal conduct, the carrier didn’t even need to invoke a criminal acts exclusion. The claim failed on timing alone.

The insured carried a Lawyers Professional Liability policy and tendered the claim, but it was denied. Here’s why:

The Timeline:

• February 11, 2023: Insured served with lawsuit (during active policy period) ✓
• May 1, 2023: Policy expires (after being shortened by endorsement)
• May 1, 2023 – May 1, 2025: 24-month Extended Reporting Period purchased
• July 20, 2023: Insured reports claim to carrier (during ERP, but TOO LATE) ✗

The insured reported the claim well within the 24-month Extended Reporting Period. Surely that means there’s coverage, right?

Wrong.

Why “Tailing Out” Doesn’t Save Late Reporting

Many insureds who are looking to close their practice or retire will “tail out” their E&O policy. They’ll shorten the active policy period based on when the practice will close or retirement will commence, then purchase an Extended Reporting Period in conjunction with the new expiration date. This creates an unbroken timeline for reporting new, unknown claims that arise after retirement.

That “unknown claims” distinction is exactly why this claim denial survived in court.

The insured was aware of the claim back in February 2023. They went through all the trouble of shortening the policy period (from June 1, 2023, to May 1, 2023) and purchasing 24 months of tail coverage…all while not reporting the February claim to the carrier.

The reason doesn’t matter. What matters is that failure to report during the active policy period proved fatal to coverage.

What The Court Said

The court noted that, per the clear and unambiguous policy language, the Extended Reporting Period applies only to “claims that are first made against the Insured during the applicable Extended Reporting Period.”

This means:

• Claims first made during the active policy period must be reported during the active policy period
• Claims first made during the ERP can be reported during the ERP for wrongful acts that occurred prior to the inception of said ERP.

The ERP does not create a grace period for late reporting of claims already made. It only provides coverage for newly arising claims that occur after the policy expires.

CRITICAL WARNING

If you are aware of a claim during the active policy period, you MUST report it before the policy expires, even if you’ve purchased an Extended Reporting Period.

ERPs do not create a grace period for late reporting of known claims. Period.

The “No Prejudice” Argument Fails

The insured tried to argue that the carrier couldn’t demonstrate prejudice from the late notice. The court rejected this argument.

With claims-made policies, timely reporting within the policy period (or applicable extended reporting period) is a condition precedent to coverage. The insurer does not need to prove prejudice from untimely notice. Courts strictly construe notice requirements in claims-made policies and view them as valid conditions precedent.

Unlike occurrence policies, the issue of prejudice is simply irrelevant in the context of a claims-made insurance policy.

What Insurance Professionals Must Do

For Brokers:

When you have a client looking to tail out their policy:

1. Conduct a claims and circumstances review – Ask explicitly: “Are you aware of any claims, demands, lawsuits, or circumstances that could give rise to a claim?”
2. Report everything before the policy expires – Every known claim and potential claim must be reported during the active policy period
3. Document the conversation – Get written confirmation from your client that they have disclosed all known matters
4. Explain what the ERP actually covers – Make it crystal clear that the tail is for unknown future claims, not a grace period for late reporting

For Insureds:

Before you shorten your policy and purchase tail coverage:

1. Review your matter management system – Look for any disputes, unhappy clients, threatened litigation, or concerning circumstances
2. Report liberally – When in doubt, report it. The carrier can always decline to open a file if nothing develops.
3. Don’t wait for the tail period – “I’ll report it during the tail” is not an option – it’s a coverage denial waiting to happen

The Bottom Line

Extended Reporting Periods are valuable coverage – but only if you understand what they actually do. They provide coverage for claims that arise after your policy expires. They do NOT extend your deadline to report claims you already know about.

If you have a client looking to tail out, make sure they’ve reported ALL known claims and circumstances before the policy expires. Otherwise, they could find themselves with an expensive tail premium and zero coverage when they need it most.

Remember: Before you tail out, report EVERYTHING.

Berkley Insurance Co. v. Caraway, Case No. 24-cv-256-DWD (S.D. Ill. Nov. 25, 2025)

Meet the Author

Lucas Roberts

Wholesale Broker, Anzen

Lucas Roberts is a professional lines specialist with experience in both underwriting and wholesale brokerage. He maintains an active LinkedIn presence, regularly sharing insights on professional liability developments. This blog takes a deeper dive into developments that have far-reaching consequences for the professional liability market.

You can see more of Lucas’s Claims Made Bites on his LinkedIn.