What is Prior Acts Coverage?

Prior acts coverage is a claims-made insurance policy feature that covers claims filed for events that occurred before the policy was purchased. The limits of prior acts coverage are determined by a retroactive coverage date, which is a certain date in the past prior to the first date of the current benefit period. In cases of prior acts coverage, any claims filed for events that took place after the retroactive date up until the point of active coverage will be covered by the insurance company. Even if a different company's insurance policy was in effect at the time of the event, prior acts coverage will still apply.

Prior acts coverage is common in the field of liability insurance as it protects entities from the legal consequences of certain activities that can cause unintentional injury or damage. For example, many doctors purchase malpractice insurance with prior acts coverage to protect themselves against defense costs in the event that they are sued for negligent care. 

Key Takeaways

• Prior acts coverage covers claims arising from insured events that occurred prior to a policy’s purchase.
• The limits of prior acts coverage are determined by a retroactive coverage date. The insurance company will cover claims filed after the retroactive coverage date up until the point of active coverage.
• Full prior acts coverage does not have a retroactive date and therefore it provides full protection from previous actions, regardless of how long ago the claim event occurred.
• An entity may purchase coverage for prior acts as part of its liability insurance, which protects it against legal repercussions.

Prior Acts Coverage vs Full Prior Acts Coverage

A full prior acts policy covers all actions taken before the policy became active, regardless of when they occurred. In order to better understand this rather complicated term, let's look at an example.

Assume that you have purchased a prior coverage claims-made policy with a retroactive date of April 1st, 2014 and a policy term that begins on February 1st 2018 and ends on February 1st 2019. On February 2nd, 2018, you have decided that you want to file a claim for an event that occurred on April 1st, 2013. Under your current policy, you will not receive any insurance coverage since the claim event took place prior to the retroactive date.

However, imagine that you had decided to purchase the same policy but with full prior acts coverage instead, with no retroactive date. As long as you made the claim anywhere between February 1st 2018 and February 2nd 2019, you will be covered by your insurance company. 

Bottom Line

While prior acts coverage has many advantages, it is important to consider all factors before choosing an insurance policy. Prior acts coverage is a feature of claims-made policies, and it should be noted that the aggregate limits of claims-made policies never usually reset, which will usually result in a lower aggregate limit. While occurrence policies do not provide coverage for prior acts, their aggregate limits reset annually.
It is best to consult a professional insurance or malpractice attorney to find out what type of coverage is best suited to your needs and preferences.