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.
That’s a mouthful, so to simplify it, COC coverage is the insurer’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 it’s imperative to report it immediately to the insurer, based on the policy’s terms and conditions and before the fund’s client finds out about it.
Cost of Corrections Coverage is subject to the policy’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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