With some frequency professionals cite claims-made coverage that they had in the past as their current coverage. Many seem to think that if the act occurred while coverage was previously inforce they still have coverage for that claim even if it was never reported to the insurer. We even had one lawyer argue in a pleading that it was “Against public policy to have claims-made insurance policies”. By the way that didn’t work.
To maintain coverage for past acts it is important to remember:
1. Report claims or incidents when you become aware of an issue that might lead to a malpractice claim to your current insurer. By reporting the issue, you protect your past acts coverage rights for this incident, even if the claim is made years later. By not reporting the issue, once the current coverage expires it may be too late to report in the future.
2. Don’t handle a malpractice claim yourself without first reporting the claim to your insurer. Remember at renewal time your application will ask about any claims that happened or might have happened during the year. If you choose not to disclose this on the renewal application, you can set yourself up for future claims being denied or coverage being rescinded. You never want your coverage rescinded.
3. Don’t hope that the issue will go away. Burying your head in the sand only makes things worse later.
4. While working in your profession, make sure to maintain continuous claims-made coverage. Protect your past acts coverage. Don’t lose your prior acts coverage by allowing your prior acts date to be shortened.
5. Don’t allow your insurance to lapse or be cancelled without obtaining an Extended Reporting Period Endorsement (Tail or ERP). If you join another firm or entity, make sure that your past acts are addressed by the new firm’s insurer or purchase an ERP.
With claims-made coverage your prior acts date is a precious thing. Once the claims-made coverage lapses you lose your past acts coverage. So even if you paid for continuous claims-made coverage for years, all that money is basically wasted once it lapses. Lapsed claims-made insurance is no insurance.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080 |