The retroactive date is a critical element of every claims-made policy. Getting it wrong — or failing to maintain it when a client switches carriers — can leave a client with no coverage for prior work. This is one of the most common sources of professional liability claims against insurance agents.
The retroactive date on a claims-made policy is the earliest date from which a covered event can give rise to a claim under the policy. If a professional made an error before the retroactive date, the current policy does not cover a claim arising from that error — even if the claim is filed during the policy period.
When a client first purchases a claims-made policy, the retroactive date is usually the inception date of the first policy. At each renewal, the retroactive date remains the same — giving the client deeper and deeper coverage for prior work.
A client who has had an E&O policy with the same retroactive date for 10 years has 10 years of prior work covered. This is why the retroactive date should almost never be moved forward.
This is where agents make costly mistakes. When a client switches to a new carrier, the new policy's retroactive date defaults to the new policy's inception date — unless the agent specifically negotiates a prior acts retroactive date matching the prior carrier's retroactive date.
If the retroactive date resets, the client loses coverage for all work done before the new policy's inception date. A claim that comes in 18 months after the switch, arising from work done 3 years ago, would fall in a gap — the old policy is no longer in force, and the new policy doesn't cover pre-inception work.
Agents have two options when a client switches claims-made carriers:
1. Negotiate a full prior acts retroactive date with the new carrier (matching the original retroactive date) 2. Purchase tail coverage (extended reporting period) from the expiring carrier to cover claims that come in after the policy ends for prior work
Always document in writing that the client was advised of the retroactive date issue and what decision was made.
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