Do Not Lose Coverage for Your Prior Acts!
Most Accountants Professional Liability insurance policies are “claims made and reported” policies. Two important features of claims made and reported policies include:
- The insurance applies only to claims that are first made and reported to the insurance company during the policy period.
- The insurance provides coverage for professional services performed from the Retroactive Date (or “Prior Acts Date” or “Initial Effective Date”) to the expiration date of the policy as stated in the Declarations.
The Retroactive Date is the earliest date from which the policy provides coverage for an act, error or omission from which a claim for damages arises. Claims arising from professional services performed prior to the policy’s Retroactive Date are not covered. The Retroactive Date is normally first established at the onset of the firm’s first policy and continues to follow the renewal of that policy for as long as the policy is continuously renewed without any lapses in coverage.
A firm that is changing from one insurance carrier to another must make the change seamlessly to avoid losing the Retroactive Date. If a lapse occurs and that continuity is broken (i.e., the policy not renewed continuously), the initial Retroactive Date is lost, and a new policy will most likely have a new Retroactive Date that is advanced to the inception date of the new policy.
The advancement of the Retroactive Date causes the firm to lose the coverage that it had with an older Retroactive Date, and past professional services that were previously covered would no longer be covered. Firms should always maintain “seamless” coverage, with no lapses in the policy along the way, to ensure coverage for professional services performed back to the original Retroactive Date.
We encourage you to return your application(s) as early as possible to avoid any gaps in coverage. In any event, return your application(s) before your current coverage expires.
Do not assume that insurers will ignore a late-returned application(s) and backdate coverage to allow you to maintain your prior acts coverage, as they are in no obligation to do so. Please contact your underwriter with any questions or requests for additional information. Thank you.
Disclaimer: This information is provided as a general overview and is not intended to be a complete description of all applicable terms and conditions of coverage. The precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued.