About Lawyers Professional Liability (LPL) Insurance
What does "claims-made" mean?
Most LPL policies are claims-made and reported policy forms. This means that coverage under the policy is usually triggered by the act of reporting the claim. Whether or not there is coverage for that claim will first depend on if there is a policy or extended reporting period in effect on the date the claim is reported to the carrier.
What is a "retroactive" or "prior acts exclusion" date?
When you purchase a lawyers professional liability policy for the first time, it only provides coverage for acts, errors or omissions resulting from services performed from the effective date of the policy to the end of the policy period (subject to policy terms and conditions). This initial inception date of coverage will be your "retroactive date" or "prior acts exclusion" date.
Work performed prior to the retroactive date will not be covered. As long as coverage is continuously renewed without any gaps in coverage, this date will remain the same on subsequent policies.
What is "prior acts" coverage?
Simply put, prior acts coverage means that acts, errors or omissions resulting from services that were performed after the retroactive date and during the initial and subsequent policy periods will be covered (subject to policy terms and conditions) if the claim arising from those services is reported during the current policy period.
Since there is usually a "lag-time" from when services are performed and claims are reported, you can understand why maintaining your prior acts coverage is very important.
How does prior acts coverage affect my premium?
When you initially obtain coverage, the premium reflects one year of coverage. With each renewal, the prior acts coverage period lengthens by a year (an additional year of coverage for work performed back to the retroactive date) which increases the claims exposure. To account for this increased exposure, the carrier will charge a higher premium. These "steps" in premium will continue each year and eventually "mature" anywhere from six to eight years from the retroactive date.