In this blog we only address Firm Prior Acts Coverage not Individual Prior Acts Coverage. Not understanding prior acts can come back to bite you. Attorney Malpractice insurance policies have a Retroactive Date which is sometimes called a Prior Acts Date. But some attorney malpractice policies do not contain a Prior Acts Date or a Prior Acts Endorsement. Normally these attorney malpractice insurance policies are Full Prior Acts (FPA). If there is no Retroactive Date Exclusion or Prior Acts Endorsement attached to the policy the prior acts policy wording needs to be read carefully, especially when switching policies. Instead of getting FPA, the policy may be written with no prior acts. A FPA claims-made liability policy that does not contain a retroactive date will cover claims arising from covered acts back to the inception date of continuous claims made coverage for the firm.
Full Prior Acts vs a Prior Acts Date
Firm with a Prior Acts Date:
The insured has a claims-made policy that includes a January 1, 2000 retroactive date and a January 1, 2020–21 policy term. If a claim is made against the insured on February 1, 2020 and the claim arose from a wrongful act that took place on January 1, 1998, there would be no coverage under the policy. This is because the wrongful act took place prior to the January 1, 2000 retroactive date.
Firm has FPA (Full Prior Acts):
This insured has a claims-made of January 1, 2020–21 but the policy contains no retroactive date. Firm has had continuous claims made coverage back to the firm’s inception. If a claim were made against the insured on February 1, 2020 from a wrongful act that took place on January 1, 1998, coverage would apply. Because the absence of a retroactive date or an endorsement stating FPA (this means that it does not matter how far in the past the wrongful act occurred that gave rise to a claim) the claim will be covered. This also assumes the claim is made during the policy period.
Impact of a Predecessor Firm:
The concept of continuous claims made coverage for the firm is often overlooked. Many law firms have had changes in structure and names through the years. Some policies address the definition of a predecessor firm in the body of the policy and encompass the different firms that were intended to be covered by the policy. But some malpractice policies state that endorsements are needed to list prior firms for coverage. If this is overlooked, the full prior acts coverage may only extend to the current iteration of the law firm. This leaves the firm exposed to uninsured past acts.
Can any firm get an FPA (Full Prior Acts) Policy?
FPA is normally written for an insured firm that already has coverage in place at the time it submits an application. Insurers rarely write FPA or offer any prior acts coverage for insureds that have not previously purchased attorney malpractice insurance. Insurers do not want to ‘buy’ a past potential claim, by endorsing a policy with prior acts coverage.
Head over to our Common Terms section to review this and other important professional liability insurance terms.
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Lee Norcross, MBA, CPCU
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