The previous lesson looked backwards; this one looks forwards, and it deals with the moment activity stops. A professional who ceases to practice ceases to pay premiums, and on a claims-made basis that means ceasing to be covered the same day, while the faults it may have committed over thirty years can still give rise to letters for years. There is no future contract to receive them, and it is that void the extended reporting period fills.
One must first see that the situation is structurally asymmetric, and that the asymmetry is the subject. During practice, each new contract collects the year's claims and is paid for doing so. At cessation, no contract follows, and yet the flow of claims does not stop: it declines slowly, over a period depending on the profession and reaching a decade in construction trades. The extended reporting period is therefore a span, written into the contract, during which claims continue to be received although the contract no longer runs.
What has to be known about it comes to four parameters, each read in the schedule. Its duration, which varies widely and which, for certain professions, is fixed by legislation rather than negotiated. Its trigger, that is, the events that open it, cessation, retirement, death, but not necessarily ordinary cancellation or non-payment. Its scope, since it covers only faults prior to cessation and adds nothing new. And above all its limit, the most misunderstood parameter.
The limit deserves dwelling on because intuition is wrong. The extended reporting period does not reopen a limit each year: it is almost always served by the limit of the last year of insurance, not reinstated. A professional whose policy carried two million per year of insurance therefore has, for the whole of its extended period, two million in total, and not two million a year for five years. The first losses notified consume that limit, and those arriving afterwards find a cover already eaten into, sometimes exhausted.
A second false idea holds that the extended reporting period is a supplement to be bought at the moment of closing. In many contracts it is included and opens automatically on cessation, without additional premium; in others it is purchased, and must then be requested within a period that is often short after cancellation. A professional closing a practice and meaning to deal with it later may therefore find the period for acquiring it has passed. It is a question to handle before closing and not after, and it belongs to the cessation timetable just as much as deregistration or the settlement of fees.
It must be added that cessation of activity is not the only situation concerned, and that the others are less visible. A professional selling a practice, merging with another, changing legal status or becoming an employee of a group finds itself in the same configuration: its former activity no longer has a contract to receive its claims. Death raises the question in a harsher form still, since it is the heirs who will discover the claim, often without knowing a policy existed or with whom.
The useful step comes to three questions asked before closing and not after. Does my policy provide an extended reporting period, for how long, and on what events does it open. Is that cover served by a limit of its own or by the last year's, and has that last year's limit already been eaten into by open claims. And must it be requested, within what period. A professional who has answered those three before closing knows what is being left behind; one who has not will find out by letter, at a moment when there is no contract, no broker and nobody to call.
An architect in sole practice since 1996 ceases activity on June 30, 2025 and retires. Her contract, claims-made with unlimited retroactive cover, carried a limit of 1.5 million euros per year of insurance and provides an extended reporting period of ten years from cessation, served by the limit of the last year of insurance. Two files were already notified before she left: a 2023 claim reserved at 400,000 euros, still open, and a March 2025 claim reserved at 250,000 euros. In October 2027 a developer claims 1.2 million euros for a 2019 project. In 2029 a third claims 600,000 euros. What is left?
The good news is that both late claims are covered in principle, which was not a given: the ten-year extended reporting period runs to 2035, the unlimited retroactive cover admits a 2019 fault without difficulty, and the architect has had no contract since 2025. The bad news is the amount, and it comes from a parameter intuition reads backwards. The extended reporting period does not open a limit of 1.5 million a year for ten years: it is served by the limit of the last year of insurance, not reinstated, that is 1.5 million for the whole period. A running total must therefore be kept, and it begins before cessation. The 400,000 euros of the 2023 claim belongs to the 2023 year of insurance and not to the last year, so it does not weigh here, but that must be verified rather than assumed, since some wordings attach open claims to the year of their settlement. The 250,000 euros of the March 2025 claim, by contrast, belongs to the 2025 year of insurance, which is the last, and therefore consumes the limit that will serve the whole extended period: 1.25 million remains. The 2027 claim, at 1.2 million, just fits within that balance and brings it down to 50,000 euros. The 2029 claim, at 600,000 euros, finds a cover practically exhausted: the architect, retired for four years, will bear roughly 550,000 euros from her personal assets. Two lessons emerge, and the second is the more useful. The first is that the order in which claims arrive decides who is covered, which is arbitrary and perfectly regular: those served first consume the shared limit. The second is that the question which would have changed this file arose before June 30, 2025, and it fitted in one sentence: is my last-year limit already eaten into, and can a limit specific to the extended period be negotiated before I close. After cessation there is nothing left to negotiate and nobody left to ask.
- 01On a claims-made basis, ceasing to practice means ceasing to be covered the same day, while letters keep arriving for years.
- 02Four parameters to read in the schedule: the duration, the events that open it, the scope, and the limit.
- 03The limit is the misunderstood parameter: the extended period is almost always served by the LAST YEAR's limit, not reinstated.
- 04The order in which claims arrive therefore decides who is covered: those served first consume a limit shared across the whole period.
- 05Sale, merger, change of status, becoming an employee and death raise the same problem as retirement, and are far less visible.