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Common Insurance Terms – What is a Retroactive Date?

December 21, 2012

Retro Dates can limit the coverage available under your Claims-Made policies.

Insurance policies contain a series of important dates used to determine the period of coverage being offered. While the “Effective Date” and “Expiration Date” of a policy are easily recognized as the dates on which the policy’s coverage begins and expires, respectively, the “Retroactive Date” included in “Claims-Made” type policies is less well understood. Our goal this week is to explain the meaning of Retroactive Dates (“Retro Dates”) and to give you an idea of how these dates may limit the coverage provided under your General or Professional Liability insurance.

Before we get too far into an explanation of Retro Dates, however, it’s useful to briefly discuss the difference between Occurrence and Claims-Made coverages. An Occurrence type policy provides coverage for only injuries or losses that occur during the policy period, regardless of when an actual lawsuit was filed against you. For example, a claim filed after the expiration of an Occurrence type policy would be covered only if the alleged injuries or losses occurred during the time the policy was in force. A common example of Occurrence coverage might include your personal Auto Liability insurance.

On the other hand, a Claims-Made type policy provides coverage only for claims made during the policy period. Such a policy would not cover claims filed before or after the active policy period, regardless of when the loss or injury occurred. Most Professional Liability policies operate on a Claims-Made basis.

Claims-Made type policies can include Retroactive Dates that may further limit the range of claims covered. If a Retroactive Date is shown on the policy, any claim made on a loss or injury that took place before the Retroactive Date is not covered, even if a claim for that loss is made during the policy period. For example, if someone files suit against you for an error or omission that took place before your E&O policy’s Retro Date, the claim will not be covered even though you had your E&O insurance in place when the suit was filed.

This example paints a scary picture, but such situations can be avoided if you know a few more things about Retro Dates and how to manage them. For instance, the most common Retro Date used for Claims-Made policies is the date from which the insured has had continuous, non-interrupted Claims-Made coverage. This is why it is critical to obtain and maintain E&O or some form of Professional Liability insurance from the very beginning of a professional practice. Furthermore, if you are renewing a Claims-Made type policy or switching carriers, try and preserve your policy’s original Retro Date or, failing that, consider purchasing a new policy with “Full Prior Acts” coverage to avoid gaps in protection.

For more on common insurance definitions, we recommend visiting the International Risk Management Institute’s online index of insurance terms and subscribing to the Avanti Reader via RSS or e-mail. You can also follow Avanti Business and Insurance Services on Facebook or Twitter (@AvantiInsurance) to receive notification of our future posts. Thanks for reading!

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