Getting to Know Your Retroactive Date
There are typically two initial timing requirements that must be met in order for there to be a potential for coverage under your professional liability (PL) insurance policy.1 The first requirement is that the claim must be first made (i.e., received by the insured) during the coverage period.
The second requirement is that the actual or alleged wrongful act, error, or omission from which the claim arises must have occurred after your policy’s retroactive date. While the claims-made nature of the policy limits the time period in which the claim must be made, the retroactive date limits the time period in which the wrongful act must have occurred. Thus, these requirements serve as figurative bookends, temporally limiting the coverage available to insureds.
The retroactive date is the date after which your actual or alleged wrongful act, error, or omission must have occurred in order for there to be a potential for coverage.
As such, the retroactive date on your PL policy is an important component of your coverage. The retroactive date is the date after which your actual or alleged wrongful act, error, or omission must have occurred in order for there to be a potential for coverage. In other words, claims arising from any actual or alleged wrongful act, error, or omission occurring prior to the retroactive date are not covered under the policy.
The retroactive date for your policy can be found in the schedule or on the declarations page. Sometimes, a policy will indicate that there is full prior acts coverage or no retroactive date, meaning there is a potential for coverage under the policy no matter when the wrongful act, error, or omission occurred. However, more often, there is an actual date listed. When an insured lets their coverage lapse, meaning they fail to purchase continuous coverage, their new policy will be written with a retroactive date that is the same as the inception date of the policy. Thus, the insured loses all of their prior acts coverage, and any claim arising from a wrongful act, error, or omission that occurred prior to inception of the policy will not be covered.
For example, if Engineering Firm A is created on January 1, 2005 and buys continuous annual coverage from that date until the present, it will be covered under its January 1, 2015 to January 1, 2016 policy for any claims arising within that time period. However, if Engineering Firm B is created on January 1, 2005, lets its coverage lapse on January 1, 2014, and does not purchase new coverage until June 1, 2014, its retroactive date will be June 1, 2014. In this instance, there will be no potential for coverage under its June 1, 2014 to June 1, 2015 policy for claims arising from any acts, errors, or omissions occurring prior to June 1, 2014.
Professional engineers should make every effort to maintain continuous coverage. Any lapse in coverage could result in a significant loss of coverage for prior acts, leaving the engineer exposed to uncovered claims.
1 The most common evidence types of evidence are proposals, manufacturer’s data, construction photos, project correspondence, as-built drawings, construction documents, and project accounting. In some instances, defective parts or other objects in the professional’s possession will be important evidence.
