Picture this: you’re navigating the labyrinthine world of insurance policies, and amidst the fine print, there lies a hidden gem – the retroactive date. This often-overlooked detail can hold significant weight, yet for many it remains shrouded in mystery. Before we embark on our journey into the depths of this topic, let’s lay some groundwork.

In the realm of insurance, there’s a common expectation: you purchase a policy, and as long as any claims arise during its active period, the insurer has your back. Sounds straightforward, doesn’t it?

In most cases, it is. But what about scenarios where policies extend coverage to events that occurred long before the policy’s inception?

You might be thinking, “Doesn’t this open the door for opportunistic behaviour? Can’t individuals just purchase policies post-event, conveniently sidestepping the risk?”

Not so fast. There are built-in safeguards to prevent such exploitation. Insurers are savvy – any claims or events that are known about that could lead to a claim are likely to be excluded automatically.

But some policies are designed to cover activities needed where potential claims might rear their heads years after the fact. Think architectural flaws that take decades to surface.

Legal and regulatory obligations add another layer of complexity. Certain insurances, like employers’ liability or vehicle insurance for public roads, aren’t optional. Nor are those required by some regulators of Professions. Non-compliance can spell trouble.

Now, onto the meat of the matter, there are two main types of liability insurance policies which differ based on how a claim is triggered – Claims Occurring and Claims Made.

In the Claims Occurring camp, like employers’ liability insurance, the insurer at the time of the incident foots the bill almost irrelevant of when a claim concerning the incident is forthcoming.

Then there’s Claims Made, a favourite among policies for professionals like accountants or architects. Here, immediate indemnification is the name of the game. No insurance, no cover  – especially relevant if your policy has lapsed because of the steep rise in professional indemnity costs.

Consider an architect with 15 years under their belt. Let’s say XYZ Insurance covered them initially. If they switch insurers, XYZ is only on the hook for losses during their tenure.

But here’s where it gets interesting: the new insurer might balk at the architect’s past activities, slapping a retroactive date from their second year onwards. Cue the absolution of liabilities from year one.

Why the retroactive date, you ask? It’s a precautionary measure, especially when a company lacks prior insurance history, a red flag for insurers, or there has been a gap in cover because of a ‘missed’ renewal, or, in extreme cases, the insurer doesn’t want to pick up the past liabilities of the firm maybe even as a false way of keeping their price down.

In any case, knowing whether your policy is Claims Occurring or Claims Made can be the difference between having cover or not. But one thing remains paramount: coverage from the get-go. Unsure about your policy’s retroactive date or type? Please do get in touch and the team at Quality PI will be happy to help.

Contact: info@qualitypi.co.uk

QPI – quality, professionalism and integrity.