The 1st year policy inception date establishes the claims-made prior acts date. This date should be maintained from renewal to renewal. Even if the insured firm switches insurers maintain the prior acts date. Attorney malpractice insurance uses a claims-made policy form. The prior acts date is essential for determining coverage for acts that may have occurred years ago. The insurer claims department checks three things in determining if policy will answer a covered loss:
1. Was the claim reported during the policy period?
2. Did the covered act occur after the prior acts date?
3. Was the act covered under the current policy provisions?
Answer no to any of the above 3 questions. The incumbent insurer likely declines coverage.
Don’t be tempted to shorten your prior acts date or let an insurer or agent convince you to shorten that date. Shortening up the prior acts date might provide some savings. But this opens up the possibility of uninsured past acts where the insurer declines coverage. With claims-made coverage only the current inforce policy provides coverage. Once a policy expires so does the obligations of the insurer to the insured.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080