Louisiana P&C Adjuster Practice Exam

When Phil cancels his claims-made Commercial General Liability policy, what type of coverage will automatically apply for claims that arise shortly after cancellation?

1. Comprehensive Coverage

2. Basic Extended Tail Coverage

3. General Liability Coverage

4. Extended Reporting Period

The correct answer is: Basic Extended Tail Coverage

The correct answer revolves around the nature of a claims-made Commercial General Liability policy and its implications upon cancellation. When a claims-made policy is canceled, it typically does not cover incidents that occur after the cancellation date. However, to provide some degree of protection for claims arising from incidents that occurred while the policy was in force but were not reported until after cancellation, Extended Reporting Period (often referred to as "tail coverage") becomes important. Extended Reporting Periods are designed specifically for claims-made policies. They ensure that if a claim is filed for an incident that occurred during the coverage period, the insured is still protected even if the policy has been canceled. This coverage allows for claims to be reported within a certain timeframe after the policy ends, thus providing continuity and protection for the insured against potential liabilities that may arise from their past activities. In this context, Basic Extended Tail Coverage logically fits as the answer since it represents the minimal period during which claims can be reported after cancellation, allowing for protection against claims that may emerge shortly after the cancellation of the policy. Understanding the importance of tail coverage is crucial for anyone in the insurance field, especially property and casualty adjusters who need to navigate the complexities of claims-made policies and their implications on coverage continuity.