When Southwest Airlines closed its $1.4 billion deal to buy AirTran on May 2, it did so knowing that AirTran's tail would not cause any problems.
The tail in question was not on the back of a plane in the newly acquired fleet, but the extended reporting period—an insurance tail—being put in place to cover AirTran's directors and officers for claims arising from events that occurred prior to the expiration of AirTran's pre-merger, claims-made D&O policy.
The requirement for Southwest to purchase a six-year tail, or runoff policy, for AirTran's directors and officers is nothing special, according to Peter Taffae, managing director of Executive Perils, a Los Angeles-based wholesale broker.
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