You can stop practising. The claims do not stop with you.
Professional liability answers to the claim when it arrives, not to the year the drawing was stamped. Close the practice, cancel the policy, and a claim about work done years ago arrives with nothing in force to meet it. The cover that handles this has to be arranged at the end, and the window to arrange it is short.
Build the practice file The short answerRun-off, also called tail or an extended reporting period
Keeps the reporting window open for work you already did
Cover any new work after the date the practice stopped
What happens to professional liability when a practice closes?
Nothing, unless run-off is arranged. A claims-made policy only responds while it is in force. Cancel it and the past work is unprotected, even though the work was properly insured on the day it was done. Run-off keeps the reporting window open for that past work after the practice has stopped taking new work.
The part that catches people is the timing. The option to buy run-off usually has a deadline attached to the end of the policy, and once that has passed the option is generally gone. It is not something that can be arranged later when a claim turns up. The conversation belongs in the same month as the decision to close, not the year after.
A claim about a building that is still standing, arriving after a practice has wound up, can reach the former principals personally if there is no policy to meet it, depending on how the practice was set up and how it was wound up. That part is a question for a lawyer rather than a broker. Engineers and Geoscientists BC puts the point this way for a retiring principal whose firm keeps trading: “If the firm remains in operation after you retire, you should require that the firm provide continuing coverage post-retirement, as this program will not provide it.” Where the practice itself closes there is no firm left to ask, which is the gap run-off is bought to fill. Continuing cover after the work stops is exactly what run-off is. Read the EGBC program questions and answers (opens in a new tab).
Both have to line up, or there is still a hole.
The retroactive date
Decides how far back the cover reaches. Run-off inherits it. If the retroactive date was moved forward at some point during an insurer change, run-off will not reach behind it either.
The reporting window
Decides how long a claim can still be made. The length varies by wording, and longer costs more. Design claims are slow to appear, which is why the length is a real decision rather than a formality.
Four endings, all of them ordinary.
Retirement
The ending people plan for financially without planning for it in insurance. A practice that stops taking work still has decades of stamped drawings behind it.
Selling or merging
Who carries the past work is a term of the deal, and it is often assumed rather than written. If the buyer is not taking on the history, run-off is the seller’s problem, and it is better to discover that before signing than after.
A partner leaves
The firm continues, one name does not. Whether that person stays protected for work they sealed depends on the wording, not on goodwill between former partners.
The practice simply stops
Work dries up, or health decides it. This is the ending with the least planning attached, and the one where the window is easiest to miss.
What design firms ask us about this.
How long should the reporting window be?
Long enough to cover how late claims actually arrive in your discipline, which for design work is years rather than months. The wordings offer a range and the longer options cost more. It is worth pricing the options side by side rather than defaulting to the shortest.
Can I buy run-off later if a claim shows up?
Almost never. The option is usually tied to a deadline around the end of the policy, and it is gone once that passes. Arranging it after a claim has appeared is not a thing insurers offer.
We are being bought. Does the buyer cover our past work?
Only if the agreement says so and the buyer’s insurer accepts it. Both halves matter. A clause in a purchase agreement does not by itself create insurance cover, and this is one assumption you do not want to get wrong.
I am the only one left and I am retiring. Does this still apply?
Yes, and it is more important, not less. A sole practitioner has nobody else to absorb a claim. Run-off is what stands between a claim about old work and personal assets.
Does run-off cover me if I take on the occasional small job?
Usually not. Run-off is written for a practice that has stopped, and new work after that date generally sits outside it. If some work is going to continue, say so before the policy is arranged. The answer is a different structure, not a hopeful reading of this one.
Not the question you had? Build the practice file and set out your own situation in plain words. A licensed broker reads it and replies in writing.
The same dates matter for the specialists you hire, which is whose cover answers when a sub-consultant gets it wrong.
Tell us the date you plan to stop.
We will read your current policy, find the retroactive date and the run-off option in it, and tell you what has to happen and by when. Next business day. A design practice winding up can take longer, because the insurer reads the expiring policy first.