What is prior acts coverage?

Complete Guide to Prior Acts Coverage

Why This Question Matters for Colorado and Utah Residents

For professionals and businesses in Colorado and Utah, understanding prior acts coverage is crucial to avoid costly gaps in protection. Professional liability claims can arise months or even years after alleged incidents, often related to services performed before the current policy took effect. Without this coverage, you risk being personally responsible for expenses stemming from past work.

• Extended protection beyond policy start: Prior acts coverage ensures that claims related to earlier work are covered if reported during the policy period, helping businesses manage long-tail risks.
• Industry-specific importance: Many professional services, such as consultants, public relations firms, and engineers, face exposure to claims related to their prior work in Colorado and Utah's dynamic markets.
• Local regulatory context: Colorado and Utah state laws and court decisions impact how claims are evaluated and when coverage applies, making tailored coverage essential.

What Most People Get Wrong

A common misconception is that a new professional liability policy automatically covers all past work. In reality, coverage is often limited to the policy's retroactive date, which may exclude some prior claims. Many businesses also overlook the importance of reporting requirements and documentation for effective claims submission.

Another misunderstanding is that prior acts coverage is a separate policy; it is typically part of your professional liability policy but must be explicitly included and carefully managed to ensure adequate protection.

The Complete Picture

Prior acts coverage extends protection to claims arising from incidents that occurred before your policy start date, provided those claims are first made during the active policy term and meet the retroactive date conditions. For example, if your retroactive date is January 1, 2020, only incidents occurring after this date will be covered, even if the claim arises later.

Claims outside the retroactive date or reported after the policy period often are not covered, which can leave significant exposures.

Properly maintaining prior acts coverage involves documenting all contracts, communications, and project details relevant to past work. This documentation facilitates timely and valid claim reporting, easing the claims process.

Colorado and Utah professionals should regularly review their coverage terms with knowledgeable brokers like FoCoIns to ensure retroactive dates align with their risk exposure and business history.

Making the Right Decision for Colorado and Utah Residents

Question 1: Does your policy include a retroactive date that covers all past work?

Check your policy’s retroactive date carefully. If your business has claims exposure related to work done before this date, prior acts coverage is essential to avoid gaps. Discuss options with your broker to adjust retroactive dates or add endorsements if needed.

• Evaluate your business history and when potential claims could arise.
• Consider the length of the statute of limitations in CO and UT for professional liability claims.

Question 2: How do reporting requirements affect your coverage?

Many policies require claims arising from prior acts to be reported within the policy period. Late reporting can lead to denied claims. Keep thorough records and notify your insurer promptly if you become aware of a potential claim.

Question 3: Should you bundle prior acts coverage with other commercial policies?

Bundling professional liability with other commercial policies can simplify management and sometimes reduce premiums. However, ensure that prior acts coverage is included explicitly and understand any differing conditions or limits between policies.