Also known as: run-off insurance · runoff coverage · run-off cover · tail coverage for M&A
Coverage that keeps a claims-made policy, most often D&O, responsive to claims made after a company is acquired, merges, or ceases operations, for wrongful acts that occurred before that transaction.
Run-off insurance is a form of tail coverage bought at a change of control, such as an acquisition or merger, that keeps the acquired company's claims-made policy able to respond to claims reported after closing, but only for wrongful acts committed before the deal closed. It is most common with D&O insurance, where the target's directors and officers stay exposed to lawsuits over pre-closing decisions long after they leave. At closing, the expiring policy typically goes into run-off for a fixed multi-year term, commonly six years, and covers only pre-closing acts, while any new acts fall under the acquirer's own program. Run-off is usually negotiated as part of the deal terms and priced as a percentage of the expiring premium for the full term. For a startup approaching a sale or change of control, it is a standard checklist item rather than an optional add-on.
Run-off insurance is coverage that keeps a claims-made policy, most often D&O, able to respond to claims reported after a company is acquired, merges, or shuts down, but only for wrongful acts that happened before that event. Instead of covering new activity, the policy is placed into run-off for a set period and responds solely to pre-transaction acts. It is essentially tail coverage applied to a change of control.
A change-of-control run-off is usually written for a fixed multi-year term negotiated in the deal, with six years being the most common length. The term is meant to outlast the period in which claims over pre-closing decisions are most likely to surface. Once the run-off term ends, the policy no longer responds to new claims. The exact length is set in the deal documents and the policy endorsement.
A normal extended reporting period, or tail, is often bought when you switch carriers or wind a company down, and it can be a shorter or open-ended window. Run-off is the change-of-control version: it is triggered by an acquisition or merger, runs for a fixed multi-year term set in the deal, covers only pre-closing wrongful acts, and is priced as a percentage of the expiring premium. New acts after closing move to the acquirer's program rather than the run-off policy.
Definitions are educational and may be modified by your specific policy language, endorsements, and state rules. For regulatory guidance, refer to the California Department of Insurance or the NAIC.
Last updated: July 2026.