Most professional liability plans for architects, engineers, and contractors are written on a claims-made basis, requiring a claim to be made against the insured and submitted to the insurer within the policy period. In most claims-made policies, there is a retroactive date requirement that must be met in order for the insurance to give coverage. What exactly is a retroactive date, and how does it affect coverage?
- A retroactive date specifies whether an insured’s error or omission that results in a claim can occur before or after the retroactive date, which is usually specified in the policy declarations. Some plans may also include wording that excludes coverage for claims originating from continuous acts or a series of linked acts that began before the retroactive date.
- The retroactive date limitation (a clause in a policy’s insuring agreement or an exclusion or endorsement to a claims-made policy that prevents coverage for claims arising from acts, errors, or omissions prior to the retroactive date) can be found in the insuring agreement or an exclusion or endorsement to a claims-made policy.
- The retroactive date is usually calculated from the first day that the insured has received continuous professional liability coverage.
- In many cases, retroactive dates predate the policy’s inception date, potentially providing coverage for claims arising from acts or omissions that occurred before the policy’s inception date. The act or omission that gave birth to the claim must have occurred during the policy period if the retroactive date is the same as the policy’s start (in addition to the claim being first made against the insured and reported to the insurer during the policy period). Full prior acts coverage is provided by claims-made plans with no retroactive date; the timing of the act or omission is irrelevant for coverage reasons.
- Professional liability lawsuits may not be brought for years after the insured has made an alleged error or omission. The retroactive date establishes a restriction on how far back the insurer will cover the insured’s mistakes. For example, even if the claim was first made and reported during the policy term, a claim stemming from design defects purportedly made by an architect previous to the retroactive date would not be covered under a claims-made policy.
- The retroactive date limitation of a claims-made policy is unambiguous and enforceable as written in the majority of countries. However, New Jersey’s highest court has ruled that if there is an objectively reasonable expectation of coverage under the circumstances, a claims-made policy giving no “previous acts” coverage (that is, the retroactive date is the policy’s inception date) violates public policy.
- Unless renewal policies and policies purchased from a new insurer have the same retroactive date, there may be a coverage gap. If an insured switches from a claims-made insurance to an occurrence-based policy, a coverage gap may appear (which requires that the injury or damage take place during the policy period). In these situations, an insured should consider obtaining tail coverage or an Extended Reporting Period under his or her expiring claims-made policy, which may help to fill any coverage gaps.
- When obtaining claims-made coverage, an insured should thoroughly comprehend the significance of the retroactive date. The justification for the retroactive date should be explicitly communicated to the insured by insurers (and its ramifications).
Phelps Dunbar, LLP contributed this bulletin. Disclaimer: The information in this bulletin is provided solely for educational and informational purposes and does not represent legal advice. The discussion of insurance policy language is merely descriptive; each policy has its own terminology and terms and conditions. For precise language, please refer to your own policy.
What is the difference between retroactive date and continuity date?
The retro date is the earliest date for which you can make a claim on your D&O insurance. Before a break or gap in coverage, the continuity date is the earliest date of continuous coverage.
What does fully retroactive mean?
A retroactive date is the first day of continuous professional indemnity insurance coverage (even if you changed insurers during that period) or a date in the past when your insurer agreed to cover you. Your insurance will not cover any claims arising from incidents that occurred before this date.
What is retroactive insurance cover?
Retroactive coverage refers to coverage for services performed before the policy’s start date, i.e. before the policy’s start date. Any claims relating to services rendered prior to the’retroactive date,’ as specified on your policy schedule, will be excluded from professional indemnity insurance.
How does a retroactive date work?
A retroactive date specifies how far back in time a loss can occur before your policy kicks in and pays out. Your policy will not pay benefits if a claim is made before the retroactive date. It’s a feature of professional liability or errors and omissions insurance with claims-made coverage.
What does unlimited retroactive date mean?
A number of doctors have expressed anxiety about switching medical indemnity insurance because they are frightened that they would lose their retroactive (‘tail’) coverage if they do so. This article debunks the myths surrounding medical indemnity insurance’s retroactive coverage.
Retroactive coverage, commonly known as ‘tail’ coverage, is liability insurance for medical services rendered in the past.
The Medical Board of Australia requires private practice doctors to include adequate retroactive coverage in their medical indemnity insurance for matters arising from earlier practice in Australia that would not otherwise be covered.
‘Claims made’ insurance policies include retroactive coverage. All medical indemnity insurance policies in Australia are ‘claims made’ policies (for more information on ‘claims made’ policies, read our blog post Medical Indemnity Insurance: The Basics).
When evaluating retroactive coverage, the retroactive date which is mentioned in the insurance schedule is critical. Medical treatments given prior to the retroactive date are not covered by a medical indemnity insurance coverage.
Assume Dr. B, an orthopaedic surgeon, performed surgery on a patient on October 1, 2016. Dr. B receives a letter from the patient’s lawyers on March 15, 2018. The patient has had numbness and pain down the side of his leg since the surgery, making him unable to work, according to the letter. Dr. B realized there was a problem with the surgery for the first time at this point.
On March 15, 2018, Dr. B notifies her risk insurer of the patient’s potential claim. (Keep in mind that, because medical indemnity insurance is based on ‘claims made,’ the date Dr B becomes aware of the claim, not the date of the incident, is important when determining insurance coverage.)
One of the first things Dr B’s 2018 medical indemnity insurer would consider when determining whether Dr B is insured is the policy’s retroactive date. Dr. B will be covered for the claim if his policy’s retroactive date is on or before 1 October 2016 (that is, on or before the surgical date). However, if Dr B’s policy’s retroactive date is after October 1, 2016 (that is, after the surgery), Dr B will not be covered for the claim, leaving her uninsured.
Of course, no doctor wants to go without coverage. At the same time, as part of the registration standards for medical indemnity insurance, doctors have certain legal obligations regarding insurance coverage: if a doctor switches medical indemnity insurers, the retroactive date on the new policy must be far enough in the past to cover prior activities.
This issue has a straightforward remedy. You won’t have a gap in coverage for unknown concerns if your medical indemnity insurance policy offers unlimited retroactive coverage, even if you switch insurers.
The medical indemnity insurance coverage in effect at the time the doctor notifies the situation will be activated, regardless of when the doctor provides the medical services that lead to an actual or possible claim.
If you’re not sure, look at your insurance schedule: next to the words ‘Retroactive Date,’ it should indicate ‘unlimited.’
What does retroactive date none mean?
Most professional indemnity policies have a retroactive date, which is the date you purchased continuous professional indemnity coverage or the date your insurer agreed to cover you.
Your insurer will not cover any claims originating from services done or advice given prior to this retroactive date. As a result, it’s critical that your retroactive date coincides with the commencement of your practice. This assures that your professional indemnity policy will cover all of the previous work you’ve done.
The retroactive date is normally listed on your insurance schedule or in an endorsement, and it can be referred to in a variety of ways:
Unlimited retroactivity or retroactive date none
If either of these are listed on a policy, it means that you have complete retroactive coverage and that the insurer will respond to a claim made during the policy period, regardless of when the work was done or advice given.
Specified retroactive date, eg retroactive date: 9 June 2009
This means that any work completed before to June 9, 2009 is not covered by your policy. You can ask your insurer to adjust the retroactive date if it is later than the day you began practicing. Please be aware that they may impose a one-time premium payment in order to do so.
Retroactive date inception (RDI)
This means that any work done or advice given before the policy’s start date is not covered. This is only permissible if you are just getting started with your practice and have never done any work before. If there is a gap in coverage, some insurers will use RDI. You can fix this by requesting your insurer to apply the proper date, but you’ll probably have to pay a one-time premium to do so.
Some insurers may use the phrase “the earlier of (a) the inception date of the first period of insurance in which this certificate was effective, or (b) the retroactive date of the policy or certificate of insurance in force immediately before the inception date of the first period of insurance in which this certificate was effective.”
This section places the burden of proof on you, the insured, to demonstrate that you have had insurance in place since you began trading. If you don’t have proof of previous policies, your retroactive date will be the date you started with your current insurer, which may be in violation of ACCA rules. You might also contact your former insurers for copies of your previous policies, although they may charge an administration fee for doing so.
It’s critical to double-check the retroactive date when renewing your professional indemnity insurance, especially if you’re switching insurers or brokers. Also, keep in mind that certain insurance companies will offer very low premiums with’retroactive date inception’ terms. The premium is only appealing in this scenario because none of your previous work will be covered and the insurance faces little risk.
What is a retroactive premium?
Retrospectively graded insurance is an insurance policy whose premium varies based on the insured company’s losses rather than industry-wide loss history. This method uses actual losses to calculate a premium that more closely represents the insured’s loss experience. After the insurance has expired, an initial premium is charged, and modifications are made on a regular basis.
Do all claims made policies have retroactive dates?
The insured is only protected from covered incidents that occur after the policy’s inception date (or its retroactive date if a policy is retroactive) “start” date other than the policy’s start date has been agreed upon), and are reported throughout the policy period. The majority of commercial general liability insurance plans “There is a retroactive date on “claims-made” policies. The primary goal of the retroactive date is to eliminate coverage for situations or incidents that the insured is aware of and that may result in future claims, i.e. to avoid the purchase of retroactive insurance. As long as the claims connected to these events are filed while your policy is still in force, you are covered for incidents that cause injury or damage to a third-party that occur on or after this date. The retroactive date is usually the policy’s start date, and it will not alter as long as your policy is renewed with the same carrier. The insurer has a minimal risk of loss the first year the policy is in existence because both the incident and the claim must be lodged during the coverage period, resulting in a cheaper premium. The coverage period increases as the policy is renewed each year, as does the insurer’s risk of loss. So, while the cheaper rate of a claims-made insurance is enticing at first, by the fifth year of coverage, the premium has stepped up to be very near to the regular rates for occurrence coverage.
Can you buy retroactive insurance?
Insurance cannot be retroactively applied. Your gap coverage often only pays the difference between what your insurance provider pays based on the vehicle’s worth and what you owe. Your gap coverage will not kick in since the insurance provider will not make a payment.