Why Is Claims Run-Off Important?
When a company shuts down, merges, is sold, or undergoes structural changes, exposures from previous actions don’t simply disappear. A lawsuit or regulatory investigation can still arise years later based on past services, decisions, or products. Without run-off coverage, these claims may remain uninsured.
Run-off policies (or extensions) provide ongoing protection for historical acts, usually for a fixed number of years—typically 1, 3, or 6 years—depending on the contractual requirements, risk profile, and regulatory environment.
Who Needs It?
- Companies going through M&A transactions
- Firms closing operations
- Directors/officers resigning
- Professional service providers retiring
- Startups winding down
What Does It Cover?
A claims run-off policy typically mirrors the coverage of the original insurance policy but limits protection to acts committed before a specific date (known as the “retroactive date”). The policy remains active only for claims reported during the run-off period and relating to past work.
Key Lines of Insurance for Run-Off:
- Directors and Officers (D&O) Insurance
- Professional Indemnity (E&O) Insurance
- Cyber Liability Insurance
- Product Liability Insurance
Run-off insurance is not just a technical detail—it’s a vital component of responsible risk management and corporate governance. Whether you’re involved in a merger, closing a company, or stepping down from a leadership role, it’s essential to secure appropriate run-off coverage to protect yourself and your legacy from future claims.