Insurance exists to manage uncertainty, but some professional risks only become apparent long after the underlying event occurred. This delayed emergence is especially relevant in professional liability insurance, where claims often arise years after the initial incident, referred to as "prior acts." Addressing these situations effectively requires understanding two critical concepts: prior acts coverage and retroactive dates.

Understanding Prior Acts Coverage

Prior acts coverage protects professionals from claims related to incidents that occurred before the current policy's inception but are reported during its active term. In professional liability and errors & omissions (E&O) policies, typically written on a claims-made basis, the policy active when the claim is reported responds, not the one active at the incident's occurrence.

A retroactive date defines the earliest incident that will be covered. Any event before this date is excluded from coverage.

What is a Retroactive Date?

A retroactive date ("retro date") marks the earliest point at which an incident can have occurred and still be eligible for coverage under a claims-made policy.

For instance, if a policy begins January 1, 2025, with a retroactive date of January 1, 2023, incidents occurring after January 1, 2023, are covered, provided the claim is reported within the policy term. Events prior to this date are excluded.

Retroactive dates are critical in policies like:

• Professional Liability
• Errors & Omissions (E&O)
• Directors & Officers (D&O)

Mechanics of Claims-Made Coverage

Claims-made policies rely on two timing conditions:

• Incident Occurrence: Must be after the retroactive date.
• Claim Reporting: Must occur during the active policy term.

Think of the retroactive date as opening a coverage "window," which closes when the policy ends.

Maintaining Continuous Coverage

Continuous coverage preserves the original retroactive date. A coverage lapse could reset this date, excluding previously covered incidents.

Strategies to Maintain Continuous Coverage:

1. Monitor Renewal Dates:
   
   • Begin renewal reviews 30–60 days before expiration to avoid gaps.
2. Switching Insurers:
   
   • Ensure new coverage starts immediately after the previous policy ends.
   • Request matching retroactive dates.
3. Consider Tail Coverage (Extended Reporting Period):
   
   • Covers claims reported after policy termination for incidents during active policy periods.

Distinguishing Coverage Types:

Example Scenario:

‍A lawyer's policy (2020–2023, retro date 2018) ends in 2023. She purchases tail coverage and in 2024 faces a claim from 2019. Tail coverage allows the claim, as the incident was after the retro date.

Strategies for Negotiating Full Prior Acts Coverage:

"Full prior acts" removes the retroactive date restriction entirely, covering all past incidents if claims arise during the policy term.

Key Strategies:

• Documentation: Provide prior policies, loss runs, endorsements, and coverage certificates.
• Highlight Risk Management: Demonstrate strong procedures, clean claim history, and effective controls.
• Early Negotiation: Clarify expectations on retro dates and prior acts coverage when negotiating with carriers.

Real-World Examples:

1. Late Discovery of Error:
   
   • Incident in April 2021, claim in 2025, policy active January 2025 with retro date January 2021: Covered.
2. Switching Carriers:
   
   • Law firm switches insurers in September 2024, retains July 2020 retro date. Claim from September 2021 is covered.
3. Coverage Gap Consequences:
   
   • Design firm lapses coverage in March 2023, reinstates July 2023 (new retro date July 2023). Claim from February 2023 incident is excluded.