Repairing Gaps in Claims-Made Policies
In the world of claims-made insurance policies, the retroactive date, or prior acts date, is everything to your insured. This is the date that starts uninterrupted claims-made coverage, with the insurance company the insured is currently with, no matter the company the insured started the retro date with.
A claim reported within the current policy period, to the current insurance company, will be the responsibility of that company to handle. It does not matter if the error date was five years ago. As long as the error date is after the retro date on the policy, the insured’s current carrier is the one that will handle it.
But what happens if there is a lapse or if the insured fails to renew coverage and now there is a gap? Do they have to start over with a new retro date and lose their prior acts coverage they previously had?
Not necessarily…
Here are a few examples that could cause an insured to have failed to renew their coverage and cause a lapse:
• The entity has an office manager handle the entities insurance renewal and there was a personnel change in that position
• Illness/extended absence of the managing member of the entity during the renewal period
• The insured’s current agent dropped the ball and failed to renew the coverage or offer renewal
• Honest mistake and the insured simply forgot
We have seen all of these situations and many more. As the insured’s agent, you do not need to tell them they will have to start over and unfortunately lose their prior acts. There are options available to them to repair this lapse.
Here at FoundersPro, we have repaired gaps in coverage from as short as one month to as long as one year. Whether the entity lapsed and they are looking to the next policy to repair the lapse or they previously had a policy, proceeded to have a lapse, then bought a new policy retro date inception (a new retro date), we have repaired those gaps as well.
The markets available for this are limited and the insured is likely to pay a higher premium for the repair, but it is now giving them back their original retro date.
In most scenarios that the retro date has been repaired, the following policy year, the insured is able to obtain more favorable terms. This will be a discussion that you, as their agent, will need to have with the insured. We need to ensure the insured understands what claims-made coverage is and how this will benefit them.
The team at FoundersPro is here to help guide you through the process, as we understand this can be a delicate situation.
About the Author
Chris Monfort is the Miscellaneous Professional Liability Practice Leader for Founders Professional. Chris help small businesses of all types across the Country secure their professional liability and management liability insurance coverages in conjunction with their retail insurance agent. Chris can be reached at Chris.Monfort@founderspro.com.