The Retroactive Date (also known as a Retro Date or Prior Acts Date) and Extended Reporting Period (ERP) are important concepts in a lawyers professional liability insurance policy, particularly in the context of claims-made and reported policies such as your ISBA Mutual Lawyers Professional Liability Policy.
When a firm purchases a claims-made policy, the Retro Date will be determined, usually based on the date the firm first obtained continuous professional liability coverage. That date is the starting point for coverage under the policy, and services rendered prior to this date will not be covered. After the policy period ends, if the policy is not renewed, services rendered after the expiration date will also not be covered.
For example, Joe left a mid-size firm to start a solo firm. One of the first things Joe did was contact ISBA Mutual to secure a lawyers professional liability policy to cover his firm. As Joe’s firm is new and did not have prior professional liability coverage, the retro date of his policy will be the same as the effective date of his first ISBA Mutual Lawyers Professional Liability.
One thing Joe learned is coverage is triggered in a claims-made and reported policy when a claim is first made against the firm and reported to the insurance company during the policy period. If his policy expired and was not renewed, he will not have a policy to report a claim. He also learned the policy provides several options to extend the time to report a claim that would otherwise have been covered if reported prior to the expiration of his policy. This additional time is known as an ERP.
The ISBA Mutual Lawyers Professional Liability Policy provides an Automatic Extended Reporting Period (AEP) if the policy is not renewed which gives the firm an additional 60 days to report a claim after the expiration date. The policy also provides a free unlimited-duration ERP in the event of death, disability, or retirement. Several ERP options are available for an additional premium and the firm can extend the time to report a claim for up to an unlimited period of time.
As for Joe, after a successful decade as a solo, he received an opportunity he could not pass up and closed his firm. While the ISBA Mutual Policy provides an additional 60 days to report a claim, Joe wanted to make sure he would be covered for any claim that may be made after this 60 days has expired. Joe purchased an Unlimited duration ERP to protect him from claims that may be asserted or made in the future.
Two years later, Joe received a demand letter from a previous client from his solo firm. As Joe purchased the ERP, he sighed in relief and tendered the claim to ISBA Mutual for coverage. As the services rendered to this client were after his prior acts date Joe is covered by the ERP for this claim. Allegations made in the claim were groundless of course, but defense costs were spent resolving this matter. Joe was happy with the outcome. There was a quick resolution and the matter was handled by, and defense costs paid by, ISBA Mutual.
Had Joe not secured an ERP, he would have had to handle the matter on his own and pay any costs out of pocket for his defense.
In summary, be like Joe.
Written by Garrett P. Kern, Esq. Vice President of Claims at ISBA Mutual
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