We often tell insured how important prior acts coverage is, but what does it cover?
Attorney malpractice insurance is written on a ‘Claims-made’ policy form. ‘Claims-made’ coverage in its purest form only provides coverage for covered acts that that occurred and were reported during the policy period. Normally, the policy period for Attorney Malpractice Insurance is one year.
Many attorney malpractice errors made do not come to light within one year. It can be many months to a few years between an error, the discovery and a claim made. Without continuous coverage for past acts, the ‘claims-made’ form does not provide the needed protection.
Your business owner’s policy and auto policy are written on an occurrence policy form. With an occurrence policy form the insurer that is on the risk at the time the act occurred is responsible for the claim. But with a claims-made policy the insurer that is on the risk at the time the claim is made is responsible for paying the claim. Providing that that claims-made policy contains a prior acts date and the covered act occurred after the prior acts date.
Depending on the insurer your prior acts coverage is determined by:
1. The past acts coverage may be a date on the declarations page labeled ‘Retro Active Date’ or ‘Prior Acts’ date.
2. The policy form may contain language that refers to the date on the declarations page.
3. The policy form may be written in such a way that if it is not amended, the policy is considered ‘Full Prior Acts’.
4. It also may be written in a way that only provides coverage for the current policy year. If this is the case, there should be endorsements attached to the policy that amends the coverage for the appropriate prior acts date.
5. The ‘prior acts’ endorsements may be for individual attorneys and/or for the firm.
6. Finally, there may be many different combinations of how prior acts coverage is addressed by different insurers using some or all the above.
The important thing to remember is that once a prior acts date is established make sure that that your prior acts date is maintained on all future polices. This is true whether you stay with the same malpractice insurer or switch to a new insurer. ‘Prior acts’ coverage is essential claims-made policy coverage.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080