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How to Preserve Your Professional Liability Insurance Policy Badge of Honor

January 08, 2019

Anyone who has been through the professional liability application process has been asked, “What’s your prior acts retroactive date?”

Retroactive date, retro date, prior acts retroactive date, or prior acts date… all mean pretty much the same thing when it comes to Claims Made Professional Liability Insurance policy forms. This “prior acts date” is the earliest date that the insurance company is willing to cover previous practice acts. This prior acts date usually applies to the business named in the policy’s Declarations page including any individual insureds such as owners, officers, or employees of the entity or a predecessor firm.

For a solo practitioner, the policy’s retro date usually is the date of purchase of the first professional liability insurance policy. This date often coincides with the opening of the business. It starts the legacy of many years of continuous insurance coverage representing an entire career. A real badge of honor!

Single owner - significance of the prior acts retroactive date

An individual’s prior acts retroactive date can change with career moves and caution needs to be taken to not create a gap in coverage for previous practice as a solo practitioner. When launching practice as a business owner, the individual prior acts retroactive date is usually the date on which the first professional liability policy is written.

This will not change if the policy is continually renewed with no interruption in coverage even if the malpractice insurers do change. This is also why it is so important to obtain malpractice coverage when starting out in private practice as a solo or small business owner. Don’t wait two years to buy your first policy and expect to obtain retroactive coverage for those first two years of practice which were uninsured.

Beware of the Wolf in sheep’s clothing…

Most claims made policy forms have a retro date that is specifically noted on the Declarations page or in an attached endorsement. It can also be less obviously displayed by being defined within the policy wording, which although subtle, is none the less, powerful.

This restriction is usually found in the definition of the Named Insured and applies on a blanket basis to all defined insureds by inserting the caveat, “but only for acts on behalf of the named insured”. If there is no such wording in the definition of the insured and no specific date listed in the Declarations or by endorsement, then the coverage is said to provide full prior acts coverage.

Certain individuals can also have separately documented retro dates. But be aware that it is commonly the intent of insurance companies to wall off exposure from previous practice settings and only cover that individual for acts on behalf of the Named Insured. Changing insurance companies that include “acts on behalf of” language in the new firm’s policy wording could unknowingly change and eliminate your prior acts coverage.

Significance of a lapse in coverage, even if temporary

Professional Liability Insurance is different than most personal insurance such as homeowners or auto insurance. With claims made professional liability insurance, if there is a lapse in coverage, usually any more than five days, professional liability insurers can be reluctant to honor the original retro date and will move up or advance the retro date to a current date. The new policy will have a current effective date, a current prior acts date, and no coverage for prior acts. However, there may be an opportunity to negotiate with the insurance company so that the new policy has a current effective date but maintains the original prior acts date - if a no known loss letter is provided warranting that there is no knowledge of any claims or the possibility of any claim being made. The gap in coverage will be uninsured, so if a claim is made during that uninsured period, there is no coverage for that claim, but the prior acts retroactive date will remain intact otherwise.

So, prior acts coverage under a professional liability insurance policy can vary from one insurance company to another. It can apply on a blanket basis to the current policy holder and its owners, officers, or employees; or it can be individually negotiated to include previous practice acts for an individual.

Prior acts coverage can also be easily forfeited if there is a lapse in coverage like not renewing your policy on time.

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