Prior acts coverage is one of the most important — and least understood — concepts in professional liability insurance. It determines whether a claims-made policy covers claims arising from work done before the policy was purchased. Getting this wrong when a client switches carriers or purchases their first policy can create dangerous coverage gaps.
On a claims-made policy, "prior acts" refers to professional services performed before the policy's retroactive date. Prior acts coverage means the policy will respond to claims arising from work done before the current policy period — as long as the claim is made during the current policy period and the alleged error occurred after the retroactive date.
A policy with "full prior acts" coverage has a retroactive date that goes back to the professional's first day of practice — meaning all prior work is covered as long as the claim is filed during the policy period.
A new professional liability policy for a professional who has never carried coverage before typically starts with a retroactive date equal to the policy inception date — meaning only services rendered after that date are covered. This is sometimes called "no prior acts" coverage.
As the professional renews each year with the same carrier (and the retroactive date stays fixed while the policy period advances), they accumulate more and more prior acts coverage. After 5 years, their retroactive date is 5 years in the past — all work done in those 5 years is covered by the current policy.
When switching carriers, the new carrier must agree to honor the same retroactive date — otherwise prior acts coverage is lost.
When a client is switching professional liability carriers, agents should:
1. Identify the current retroactive date from the expiring policy 2. Request a matching retroactive date from all new carriers 3. Confirm the new carrier will provide full prior acts back to that date 4. If no carrier will honor the retroactive date, evaluate whether tail coverage from the expiring carrier is appropriate
Some carriers charge additional premium for prior acts — particularly if the retroactive date is many years in the past or if there are prior claims. Get the prior acts coverage confirmed in writing before binding.
When a professional is retiring, selling their practice, or permanently leaving a field, they have two options for protecting themselves against future claims arising from past work:
• Purchase tail coverage (extended reporting period) from the expiring carrier — this allows claims to be filed against the old policy even after it expires • Find a new carrier who will provide prior acts coverage going back to the needed retroactive date
Tail coverage is usually the simpler option for one-time situations (retirement, practice sale). Prior acts from a new carrier is usually the right approach for professionals who are simply switching markets.
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