The Professional Liability Insurance Policy Badge of Honor

The-badge-of-honor-in-a-claims-made-policies

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. If you have been through the professional liability application process, you likely were asked “what’s your retro date?”

For a long-time practitioner, your retro date usually coincides with the date you first purchased liability insurance probably close to the date you first started practice. For many, your retro date 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

Your individual prior acts retroactive date can change with your career moves depending if you choose to be employed by a business, own your own business as a solo practitioner, or form a limited liability company like a LLC or PLC. If you start your professional career as a business owner, your individual prior acts retroactive date is the date on which your first professional liability policy is written.

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

Multiple owners - significance of the prior acts retroactive date

Likewise, a partnership or corporation with multiple owners and employees will have a retroactive date from which continuous coverage was first obtained by the business entity or predecessor firm. This is true provided coverage is continually renewed without interruption.

If there is a significant lapse in coverage, usually any more than 5 days, professional liability insurers can be reluctant to honor your original retro date and will move up or advance the retro date to a current date. Your new policy will have a current effective date, a current prior acts date, and no coverage for prior acts.

If the lapse in coverage is within thirty days, you may be able to negotiate your new policy with a current effective date but maintain your original prior acts date if a no known loss letter is provided warranting that you have no knowledge of any claims or the possibility of any claims 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 your prior acts retroactive date will remain the same.

Beware of the Wolf in sheep’s clothing…

Most claims made policy forms have a retro date either specifically noted on the Declarations page or less obviously displayed by being defined within the policy wording; the latter is subtle, but none the less, powerful. The “prior acts date” is the earliest date that the insurance company is willing to cover previous acts. This prior acts date can apply to the named entity including any individual insureds such as owners, officers, or employees.

Certain individuals can have separately documented retro dates as well. This is common when the intent of the insurance company is to wall off exposure from previous practice settings and only cover that individual for acts on behalf of the named insured.

This restriction is usually found in the definition of the named insured and applies on a blanket basis to all defined insureds or only to those having 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.

So now you understand that your prior acts retroactive date follows you through you professional insurance “career”. Don’t treat it casually, it needs to be preserved under a claims made policy for years. An interruption in coverage or changing insurance companies that include "acts on behalf of" language could unknowingly change or eliminate your prior acts coverage.