Why it’s so vital you provide a Retroactive Date when switching your Professional Liability Insurance Coverage from one Carrier to another.
When purchasing any new Errors and Omissions insurance policy or Tail Coverage, providing your correct policy retroactive date is crucial. The retroactive date on a Claims Made Policy is the starting point from which your policy will cover past acts or omissions. It represents the date from which your E&O insurance coverage limits begin, even if a claim arises after the new policy effective date. Here’s why providing your retroactive date and truthful information is so important:
Continuous Coverage: The retroactive date ensures continuity of coverage for past acts or omissions. If you provide the new carrier a created or incorrect date, you will create a coverage gap which if discovered during a Claims Investigation, may void any coverage based on that date or worse deemed fraud and your policy cancelled as of that day or revoked completely leaving and previously open claims filed before or after without coverage. This would leave you open to the complete responsibility to pay any attorneys fees and court verdicts yourself.
Prior Knowledge Exclusion: E&O Insurance policies often include a “prior knowledge” or “known acts” exclusion. This exclusion will deny coverage for any filed claims deemed Denied for acts or omissions which you were found to be aware of previous to the policy retroactive date. In short, when you sign your new application for coverage and you know of or may have been aware of a previous incident which may result in a future claim from a previous policy period, you may be subject to a revocation of your E&O Insurance Benefits.
Previous policy non-renewal or previous cancellation for any reason: If you purchase new E&O Insurance coverage knowing you’ve had incurred a lapse in coverage now or a previous lapse during a prior Errors & Omissions policy period for which a Retroactive Date was used to create an insured time period, and this act is discovered, your current coverage may be cancelled or withdrawn. Further, you may be subject to being reported to the state insurance authority or authorities to which you hold a current Property and Casualty License.
In conclusion: not providing your retroactive date or withholding information regarding a previous claim or possible future claim when purchasing a new E&O Insurance policy can have serious ramifications affecting your E&O Insurance Coverage. It may create coverage gaps, exclude claims arising from known acts or omissions, and leave you exposed to significant financial risk. To ensure proper coverage, it’s essential to accurately provide your retroactive date to your new insurance agent.