Runoff Insurance

You buy a vacuum cleaner from Suck Central Ltd. A year after you buy it, the vacuum goes crazy and starts rampaging through your house. Before you finally pull the plug and smack it into submission with a broom, it's destroyed most of your living room and traumatized your dog. You sue. The psychiatrist bills for your dog alone are going to cost tens of thousands of dollars.

Unfortunately, Suck Central went bankrupt six months ago. Apparently, the rampaging vacuums were a serious problem and the company's executives have fled to Paraguay.

So, that's it, right? Company's gone...nothing you can do to collect on your lawsuit, right?

Not quite. Not if the company had runoff insurance. These provisions state that the insurer is still liable for claims made, even after the insurance policy has expired or been canceled. Typically, the runoff provisions have a deadline...some period of time after the end of the policy when they are still in effect (so you can't start making claims decades later.) But they do cover situations where the original company is no longer in operation, whether it's been bought out or has closed down.