When Firms Merge, or Partners Go Their Own Way

Claims-made cover follows the entity, not the individual. So the moment a firm merges, splits, or rebrands, someone has to decide what happens to the years of work already done — because a claim can arrive long after the letterhead changes.

The problem is easiest to see in a two-partner firm that separates. Both partners spent years advising clients under the old firm's name and the old firm's policy. If that policy simply lapses, the work it covered stops being covered, and both partners are exposed to anything that surfaces later.

There are three usual answers. First, the old entity buys extended reporting — tail coverage — which keeps the door open for claims made after the policy ends. This is the cleanest option and the most expensive; tail is typically priced as a multiple of the expiring premium and bought once, up front.

Second, one side takes the history. The continuing firm keeps the original retroactive date and accepts the old entity's liability record as its own. Cheaper, and often the right answer when one partner is genuinely continuing the practice — but the firm inheriting it is inheriting real exposure, so it should be a priced, deliberate decision rather than a default.

Third, they split the cost. Both sides contribute to tail on the old entity, then each carries their own new policy going forward. Fair, and usually the easiest to agree in the moment, though it needs writing into the separation terms rather than settling on a handshake.

Mergers pose the same question from the other direction. If the acquiring firm takes on the other's people and work, does it also take on their claims history? Buying tail on the absorbed entity before completion is the clean version. Absorbing the history is cheaper and is a genuine underwriting change — one the surviving firm's insurer needs to know about.

Whichever route is chosen, the decision belongs in the transaction documents, not in a follow-up email six months later. Tell your broker before the change completes, not after — options that are straightforward beforehand become expensive or unavailable once the old policy has lapsed.