A run-off insurance coverage clause requires a SaaS (Software-as-a-Service) provider to maintain professional liability, errors and omissions, or cyber liability insurance for a specified period after the contract ends or the service is discontinued. "Run-off" refers to the tail period following contract termination. This clause matters because SaaS services often create ongoing risks even after the relationship ends—for example, data breaches discovered months later, software defects that cause client losses, or security vulnerabilities in retained data. Without run-off coverage, the client would have no recourse if problems emerge post-termination. The clause protects the client by ensuring insurance remains available to cover claims arising from services already delivered, even though the provider is no longer actively performing work. It's particularly important in SaaS because data and system access often persist beyond the formal contract end date.
If you're a SaaS provider, negotiate a reasonable run-off period (typically 12-24 months rather than indefinite) and clarify that the client must notify you of claims within a defined timeframe. Confirm with your insurance broker that your professional liability policy includes tail coverage or "claims-made" provisions that extend to the run-off period, and budget for the cost of extended reporting period (ERP) endorsements. If you're a client, specify exactly which types of claims are covered during run-off (data breaches, service failures, IP infringement), require proof of insurance before contract termination, and ensure the run-off period is long enough to discover latent issues. Avoid indefinite run-off obligations, as these are difficult to insure and enforce.
Frequently Asked Questions
What does this clause mean in simple terms?
A run-off insurance coverage clause requires a SaaS (Software-as-a-Service) provider to maintain professional liability, errors and omissions, or cyber liability insurance for a specified period after the contract ends or the service is discontinued.
Why should I care about this clause?
"Run-off" refers to the tail period following contract termination.
What are my options?
This clause matters because SaaS services often create ongoing risks even after the relationship ends—for example, data breaches discovered months later, software defects that cause client losses, or security vulnerabilities in retained data.
How does this affect small businesses?
Without run-off coverage, the client would have no recourse if problems emerge post-termination.