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Petitioner’s Liability for Policy Claims
Since 1982, petitioner has written professional liability
insurance policies on a claims-made basis. Under such policies,
petitioner is liable only for claims that are made and reported
during the effective dates of a policy. For example, if an
insured was covered by a policy effective January 1 through
December 31, 1993, the insured would have professional liability
protection for claims made and reported during that policy year.
If the insured terminated insurance coverage effective January 1,
1994, any claims made thereafter would not be covered unless the
insured purchased an extended reporting period endorsement
(ERE).7
Petitioner's Loss Reserves Process
Petitioner annually determines its loss and loss adjustment
expense reserves (loss reserves) for purposes of reporting such
amounts on the NAIC annual statement, particularly schedule P
thereto. Petitioner’s total unpaid loss reserve comprises two
components: An incurred loss case reserve (case reserve) and a
7 From 1982 until 1986, petitioner offered its insureds the
opportunity to purchase ERE’s with an unlimited tail period. In
order to receive this type of coverage, the insured was required
to purchase a policy endorsement that provided for extended
coverage for claims that were made and reported after the claims-
made policy period had expired. Since 1986, petitioner has
offered to its insureds ERE’s, with up to five annual renewals,
that provide only for a 1-year extended reporting period.
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Last modified: May 25, 2011