Prior Acts Coverage, also known as Retroactive Coverage, is an insurance policy provision that covers incidents or claims that occurred before the policy's effective date, but were discovered or filed during the policy period. This coverage is particularly relevant for claims-made policies, which only provide coverage for claims that are made during the policy period, as opposed to occurrence-based policies, which provide coverage for incidents that occurred during the policy period regardless of when the claim is made.
For example, if a professional liability insurance policy is purchased in 2023, but the insured party is sued for an incident that occurred in 2021, the policy with prior acts coverage would cover the claim, whereas a policy without this coverage would not.
Key features of Prior Acts Coverage include:
• Coverage for claims made during the policy period for incidents that occurred before the policy's effective date
• Applicable to claims-made policies, which only provide coverage for claims made during the policy period
• Helps protect the insured party from uncovered claims that were unknown or undiscovered at the time the policy was purchased
• Typically subject to a retroactive date, which is the earliest date that coverage will apply for incidents that occurred before the policy's effective date
• May have additional premium costs associated with the extended coverage.
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