One of the most difficult concepts for purchasers of professional liability insurance to grasp is the meaning of “prior acts coverage” and “claims-made policies." As the case of Christ Academy v. Hermes Sargant Bates illustrates, a professional negligence claim against a lawyer or any other type of professional, typically evolves from services that were provided several years in the past.
At the time the lawyer provides the legal services, it is usually not foreseeable that a lawsuit for malpractice will be filed in the future. So, it is important that the law firm have a policy in effect that will provide coverage for any claim that arises out of legal services provided at the time the services were provided (the claim is made) as well as when the claim is reported. This is the nature of a “claims made and reported” insurance policy. A professional liability insurance policy covers claims made subsequent to the retroactive date of the policy and prior to the expiration of the policy.
In order for the insurance company to respond to the suit against Hermes Sargant Bates, the insurance policy in effect at the time the malpractice suit was filed would need a retroactive date that preceded the defense of the Christ Academy gender discrimination suit and was also in effect at the time the suit the was filed. If the policy does not meet either of these tests, the company will deny coverage for the claim. The coverage in effect between the retroactive date of the policy and the expiration of the policy is referred to as “prior acts coverage” because it provides protection to the firm for claims arising out of legal services provided before the effective date of the policy.
If you have questions about prior acts coverage and/or professional liability insurance, contact our office at Info@L2Ins.com or (866) 940-1101