Runoff Insurance

An insurance policy purchased to cover future claims related to past liabilities. Typically used in two contexts:

(a) Mergers and acquisitions where the acquiring company usually buys a policy, paid for out of the purchase price, to cover any acquired liabilities, or liabilities of a particular class, such as intellectual property infringement. For a detailed description of this process see the article Equine-Dentition: Addressing the problem of ongoing IP disputes in a merger;

(b) in the context of professional indemnity insurance for lawyers, accountants and doctors, it refers to the requirement that after a practice ends, they continue paying insurance until the applicable statutes of limitations have run, or make a one time buy of insurance to cover claims that may be made in the future.

Runoff insurance is also sometimes referred to as “Closeout Insurance.”

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