A claim must be immediately reported to the insurance company during the policy period for it to be covered and settled properly. A professional will not get the benefits of policy coverage if the claim is made after the expiration of the policy. However, some policies have the option to purchase an extended reporting period.

The extended claim reporting period gives an option to cover the claims even after the expiration of the policy period.

A wrongful act may have occurred during the policy period, but its effects may not be seen until the policy gets over. Such situation might put the insured in a severe condition as his policy period is over. But the extended claim reporting clause gives the insured a definite amount of time after the policy period to report a claim.

Extended claim reporting clause in professional indemnity insurance policy is the period specified after the end of the insurance policy for reporting claims arising out of breach of duty by the insured during his policy period.

The extended claim reporting clause extends the reporting period for 60 days to 90 days after the policy expiration date. The insured however is charged with an additional premium when he exercises this option.

The following conditions must be met by the insured to get cover under extended claim reporting clause in professional indemnity insurance:

  • The occurrence of the wrongful act must be during the period of the professional indemnity insurance.
  • Acts that occur during extended reporting period cannot gain any coverage.
  • It is important that the insured makes and reports the claim during the extended reporting period.

Case: 1

Amol was an owner of an IT company named R.N Inc. This firm aced in providing software solutions to its clients according to their needs. Amol had secured a professional indemnity policy with an extended claim reporting clause from an insurance company.

One day, Amol got a new project from a big client. The project consisted of writing a new program for the client’s software. After completion of the project, the program was handed to the client. A month passed, and the program started creating problems. The client found that there was a bug in the program which was gone unnoticed by Amol. As a result of this bug, the program crashed, and the client suffered massive financial losses.

Read More: How does Professional Indemnity Insurance Benefit the IT Firms?

Amol was sued by the client for his negligence in the programming. Amol rushed to his insurance providers to seek help.

Upon investigation, it was found that Amol had created and submitted the program to his client on 5th July 2013. Amol’s professional indemnity policy expired on 20th July 2013. But the policy had an extended claim reporting clause which stated that Amol could file for claim up to 60 days after the policy was over. But it was vital that Amol catered to the service during the tenure of the policy period. Since Amol had submitted the program to the clients on 5th July 2013, which was before the policy got over, the insurance company approved his claim. Thus, the extended claim reporting clause in Amol’s professional Indemnity Insurance policy helped him to get out of the situation even when the policy period was over.

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