Prior Acts Coverage

Example

“The architect purchased prior acts coverage when switching insurance companies to ensure protection against potential lawsuits from buildings designed three years earlier.”

Memory Tip

Think 'Prior Acts Coverage' as 'Past Actions Covered' - it protects you from claims about work you did before your current policy started.

Why It Matters

Prior acts coverage prevents dangerous gaps in professional liability protection when changing insurers or policies. Without this coverage, professionals could face personal liability for claims arising from previous work, potentially resulting in significant financial losses from lawsuits or regulatory actions related to past professional services.

Common Misconception

Many professionals assume their new insurance policy automatically covers all previous work, but most professional liability policies only cover prior acts if specifically purchased and may have limitations or higher deductibles. Some also think prior acts coverage is permanent, but it typically only applies while the current policy remains active.

In Practice

Dr. Martinez switches malpractice insurers after 5 years with her previous carrier. Her new policy costs $8,000 annually, but adding prior acts coverage for her previous 5 years of practice adds $2,400 to the premium. Two years later, a patient sues over treatment from 4 years ago. The prior acts coverage handles the $150,000 settlement that would have been her personal responsibility without this protection.

Etymology

Developed in professional liability insurance in the 1960s, combining 'prior' from Latin 'prior' meaning earlier, with 'acts' referring to professional services, as the need arose to cover claims with long reporting delays.

Common Misspellings

Related Terms

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