Cost of Corrections or COC Coverage reimburses a hedge fund manager for the cost to correct a situation (such as an error in trading for example) that if left uncorrected would result in monetary damages to a client or shareholders of the fund; and if left uncorrected would likely also result in claim to the Errors & Omissions portion of the fund's management liability policy.
Thatâ€™s a mouthful, so to simplify it, COC coverage is the insurerâ€™s way of stepping in when a transnational error is made and reimburses the fund for the cost of correcting the mistake (after the retention) to avoid the fund being sued for the mistake and resulting in a more expensive problem of litigation for the fund and the insurer.
Time is of the essence. Once an error is recognized itâ€™s imperative to report it immediately to the insurer, based on the policyâ€™s terms and conditions and before the fundâ€™s client finds out about it.
Cost of Corrections Coverage is subject to the policyâ€™s retention which can be $100,000, $250,000 or higher. And finally COC is NOT automatically included in most policy forms and needs to be properly endorsed onto the combined D&O/E&O policy.
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