Call Us 866.940.1101 ☰ ˟
866.940.1101
Logo
  • Home
  • About Us
    • About Us
    • Employee Directory
    • Partners Page
    • Event Calendar
    • Refer a Friend
  • Get A Quote
  • Products
    • Lawyers Malpractice Insurance
    • Professional Liability Coverage For Attorneys
    • Accountants Professional Liability
    • Dentist Malpractice Insurance
    • Business Owners Policy
    • Cyber Liability Insurance
    • Workers Compensation Insurance
    • Title Agents E&O Insurance
    • Paralegal Malpractice Insurance
  • Testimonials
  • Common Terms
    • Common Terms
    • Frequently Asked Questions
  • Blog
  • Contact
  • Areas We Serve
    • Grand Rapids, MI
    • Detroit, MI
    • Lansing, MI
    • Kalamazoo, MI
Home > Blog > Why do you need Prior Acts with Claims-Made Insurance?
WEDNESDAY, JANUARY 23, 2019

Why do you need Prior Acts with Claims-Made Insurance?

Claims Made Insurance PolicyBrief background

Most property & casualty insurance policies are occurrence policies.  Your personal auto, homeowners and business owners policies are good examples of an occurrence policy.  With an occurrence policy, the policy that is on the risk at the time that a covered act ‘occurs’ is the policy that the claim will be settled under, regardless of when the act is reported (barring policy provisions and/or statute of limitations issues).   For most property losses i.e., such as an auto accident, it is very easy to determine the occurrence date.  Same goes for the casualty (liability) side of that auto accident; there is a very precise date and time as to when the act occurred.  The time frame to report, adjust and settle most of these claim types is fairly short.

Professional Liability Insurance, as well as some other insurance casualty lines do not always have a short claims cycle. 

1.       The time between when the act occurs, the claim is made, and act reported can be months or years apart.

2.       The ‘act’ might span many years, where determining with an occurrence type policy which policy/insurer is responsible for providing coverage for the covered act can be very difficult to determine.  A pollution claim is a great example of this type of loss. 

3.       Because of the time frame between when the act occurred and the knowledge of the actual claim to report can be long it can be difficult for an insurer to know what their true loss costs are for any given policy year if an occurrence policy were used.  If an insurer cannot predict its true claims costs for a given line of business, it is unlikely the insurer or industry would provide insurance at a cost that the insurance consumer would want to purchase.

During the liability insurance crisis in the 80’s, this was part of the problem.  The availability for casualty insurance for certain lines of business dried up and/or became extremely costly.

Claims-Made Insurance

Claims-made professional liability insurance for lawyers, accountants, doctors, title agents and other malpractice lines came into being to address these issues.  With a claims-made policy in its purest form, the covered act occurrence and reported claim need to happen in the same policy period.  While this might work for some lines of business for others such as professional liability insurance or malpractice insurance this is not a workable solution.

The use of a “prior acts date” or “retroactive date” solves this issue.

Prior Acts

With a prior acts date, the policy that is inforce when the covered act is reported or the “claim made” is the policy form and insurer that will provide the coverage, providing that the covered act occurred after the prior acts date on the current policy.  The claims-made policy form then addresses all of the issues raised above.

Down side of Claims-Made Coverage

The danger with claims-made coverage is if the insured allows coverage to lapse.  Then there is no insurance policy to report future claims to for past acts, even though there was coverage inforce at the time the act occurred.  This brings up 2 responsibilities for the insured with claims-made coverage:

1.       The insured needs to maintain continuous claims made coverage.  A coverage “gap” with claims-made insurance usually results in the resetting of the prior acts date to the inception date of the new claims-made insurance, thus wiping out coverage for all past acts.

2.       The insured needs to make sure that at renewal, especially if changing insurers, that the prior acts date is maintained on future renewals and is not shortened.

L Squared Insurance Agency specializes in claims made coverage for Lawyers, Accountants, Title Agencies, and Dentist.

 

Lee Norcross 
Contact Me Today
Lee Norcross, MBA, CPCU

Managing Director, CEO
Click here to contact Lee Norcross, MBA, CPCU

(616) 940-1101 Ext. 7080 
Posted 8:00 AM

Tags: legal liability insurance, accountant errors & omissions, claims made insurance, prior acts
Share |


No Comments


Post a Comment
Required
Required (Not Displayed)
Required


All comments are moderated and stripped of HTML.

NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
Blog Archive
  • 2023
  • 2022
  • 2021
  • 2020
  • 2019
  • 2018
  • 2017
  • 2016
  • 2015
  • 2013
  • 2011

  • lawyers professional liability insurance(429)
  • attorney malpractice insurance(399)
  • attorney malpractice(337)
  • legal malpractice(225)
  • legal liability(134)
  • cyber insurance(106)
  • data breach(92)
  • ethics(87)
  • erp(57)
  • malpractice insurance(55)
  • claims(39)
  • title agency e&o(36)
  • accountant e&o(34)
  • extended reporting period endorsement(30)
  • tail(29)
  • phishing(25)
  • legal malpractice insurance(23)
  • prior acts(22)
  • claims made coverage(21)
  • extended reporting period(21)
  • cyber security(20)
  • cyber liability(18)
  • accountant errors & omissions(18)
  • claims reporting(18)
  • crime insurance(16)
  • ransomware(16)
  • claim prevention(16)
  • attorney protective cle(14)
  • the hartford weekly newsletter(14)
  • attorney protective cle webinar(14)
  • 2022 mcgowan pro cpe webinar for accountants(13)
  • professional liability insurance(13)
  • mcgowan webinar series for cpas 2021(12)
  • retirement tail(12)
  • attpro tip of the month(12)
  • business owners insurance(11)
  • legal liability insurance(11)
  • fee suits(10)
  • full prior acts(10)
  • cyber crime(10)
  • accountant errors & omissions insurance(10)
  • prior acts date(9)
  • step rating(9)
  • non-practicing erp(9)
  • bop(9)
  • cyber liability insurance(9)
  • title agent errors & omissions(9)
  • claims made(9)
  • coverage(8)
  • webinar(8)

View Mobile Version
Logo
Quick Links
Home Our Products Customer Service Payment Options Common Terms
About Us Refer A Friend Our Carriers Blog Contact Us
Location
2430 Camelot Ct SE
Grand Rapids, MI 49546

Local: 616.940.1101
Toll Free: 866.940.1101
Email: info@L2ins.com
Facebook Twitter Social LinkedIn
© Copyright. All rights reserved.
Powered by Insurance Website Builder