Question from Attorney:
Why do I need prior acts coverage for Attorney Malpractice Insurance?
Lawyers Professional Liability Insurance is written on a ‘Claims-made’ policy form. ‘Claims-made’ coverage in its purest form would only provide coverage for covered acts that that occurred and were reported during the policy period. Generally the policy period for Attorney Malpractice is written on an annual basis.
Many attorney malpractice errors made do not come to light within just one policy year. Many times it can be many months to years for an error to be discovered with a lawyer’s liability insurance claim. Even though you may have maintained coverage for many years, without coverage for past acts, the “Claims-made” form would not provide the protection that a law firm would need.
Your business owner’s policy and auto policy are written on an occurrence policy form. With an occurrence policy form the insurer that was on the risk at the time the act occurred is responsible for the claim. But with a claims-made policy the insurer that was on the risk at the time the claim was made is responsible for paying the claim. Providing that that claims-made policy contains a prior acts date and the act occurred after that prior acts date.
‘Prior acts’ coverage is an essential part of a claims-made policy because it provides the coverage for past acts. Depending on the insurer:
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 in the form that refers to the date on the declarations page.
3. In some cases the policy form is written in such a way that if it is not amended, that the policy is considered ‘Full Prior Acts’.
4. It also may be written in a way that it 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 can be for individual attorneys and/or for the firm.
6. Finally there are many different combinations of how prior acts coverage is addressed by different malpractice carriers using some or all of the above.
The important thing to remember is that once a prior acts date is established make sure that that 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.