Depending on the nature of your work, it may be beneficial for you to carry professional liability insurance. Largely due to changes that occurred in the insurance industry during the 1980s, most professional liability insurance contracts are now claims-made policies. If your policy is claims-made, you need to be aware of several key components in your insurance contract, including your policy’s retroactive date.
Meaning of Retroactive Date
In general, most claims-made insurance contracts include a retroactive date. Your policy’s retroactive date is the date on which your professional liability coverage begins, meaning you are covered for incidents that cause injury or damage to a third-party that occur on or after this date as long as the claims related to these events are filed while your liability insurance is still in force. Typically, your policy’s retroactive date is the date on which your professional liability contract is written and will not change as long as you continually renew your policy.
Full Prior-Acts Coverage vs. Prior-Acts Coverage
If your professional liability insurance policy does not have a retroactive date, you have what is referred to as, “full prior-acts coverage.” This means your insurer will respond to claims made against you regardless of when the injurious or damaging events that prompted them to be filed occurred, as long as the claims are filed after your coverage began and you were unaware that these claims would be made when you entered into a contract with your insurance carrier.
If your liability contract has a retroactive date, it is generally advisable for that date to be as far back in time as possible. If you change insurers and your new carrier agrees to honor the retroactive date that was included in the policy you had with another insurance company, your new policy will provide prior-acts coverage. With prior-acts coverage, you will be protected from claims made against you as of the retroactive date that was in your previous policy, even though your new policy was written a year or several years after that date.
Moving the Date Forward in Time
The advancement of your professional liability insurance policy’s retroactive date occurs when your contract’s retroactive date is moved forward in time. An insurer may advance your retroactive date when you renew your policy or sign a new contract if circumstances that occurred during a period of time subsequent to your original retroactive date will subject you to having multiple costly claims against you, meaning the carrier will move your retroactive date forward to limit its exposure to risk and you will not be covered for claims that are filed as a result of events that occurred before your advanced retroactive date.
When to Purchase a "Tail"
If you decide to terminate your professional liability insurance, but want to remain protected from claims made against you on or after your retroactive date, you can purchase an extended-reporting-period endorsement, or "tail." You will typically have up to 30 days to purchase a tail after you cancel your claims-made liability policy.
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