Companies get insurance policies in case a claim is made against them. These are (unoriginally enough) called claims-made policies.
If a claims-made policy is cancelled or terminated or allowed to expire, this can lead a gap in coverage. A claim filed after the policy had terminated wouldn't be covered; the company would be on the hook for the costs, rather than the former insurance provider.
An extended reporting period eases this problem. This provision extends the period for a claim to be filed, allowing situations that arise after the policy has terminated to be covered (up to a certain point).
So much for the "extended reporting period provision." The "bilateral" part comes in if the extended reporting period can get activated, no matter who canceled the insurance...the company buying the insurance or the provider. Otherwise, the clause is known as the "unilateral extended reporting period provision."
Related or Semi-related Video
Finance: What is Counterparty Risk?9 Views
Finance a la shmoop what is counterparty risk?
alright here's you the party and here's the guy you're contracting with to sell [Woman and man stood side by side]
18 tons of bricks or buy a line of credit for your flower shop or sell a
futures contract with the right to buy oil at 80 bucks a barrel for the next [Person signs contract]
two years so you're the party and he's the counterparty and the yin and yang of
the party and here's the risk yeah well the counterparty risk is just
that the person you contracted with doesn't live up to their end of the
bargain you pay them good money you sign a good contract all lawyered up and [Stack of money and contract appears]
stuff and then they split like totally split disappeared sea men choose the
bottom of the ocean maybe they went to Bora Bora
maybe they got facial surgery in the Philippines you know they do that now [George Clooney in a surgical bed]
well when that happens you will probably feel like crying and you should its your
counterparty you can cry if you want to come on that was a good reference people [Man singing]
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