Prior Acts Coverage

Prior acts coverage is an insurance policy feature that covers claims made on insurable events that occurred prior to a policy’s purchase. This simplifies insurance matters for holders of liability insurance who change insurance providers.

Prior acts coverage typically gets sold in the context of liability insurance, which protects entities from suffering legal repercussions for certain activities they undertake that inadvertently cause injury or damage to others. For example, malpractice insurance may cover legal costs and damages in the event a patient sued a medical practitioner for the provision of negligent care. Since these claims can take time to adjudicate, a business could easily end up filing a claim for an action it committed a year or more earlier.

Insurance companies offering prior acts coverage usually provide a retroactive date at some point prior to the first date of the coverage period. The insurance company will then cover any claims filed for events that occurred after the retroactive date, even if those events took place when the business or entity involved had insurance from another provider.

Medical malpractice insurance rates vary widely from state to state and based upon the type of practice a doctor has. Policies clearly identify their effective dates and the risks that policy will cover.  In other words, the policy will cover any claims made during the coverage period for any actions taken during the coverage period. Without extra coverage, however, a doctor who switches malpractice insurance carriers at the beginning of the year to take advantage of better premiums would have a problem if a claim arose in March for a procedure the doctor performed the previous June.

If the doctor takes out a new malpractice policy that includes prior acts coverage with a retroactive date before June 1 of the previous year, the new coverage will pay the claim. Most claims-made policies automatically apply a retroactive date corresponding with the first date of coverage when insured parties continually renew their policies. Therefore, a doctor covered with such a policy would have no issue filing a claim on a four-year-old case under a policy that the practice continuously renewed for the previous five years.

Some insurers offer prior acts coverage without a retroactive date. These policies cover any claims made during the coverage period, regardless of when the activity giving rise to the claim took place. Insurers typically shy away from offering full prior acts coverage to individuals or businesses who operated without previous liability insurance coverage on the theory that such customers likely waited to purchase insurance until they perceive a heightened risk of one or more claims.