Most professional firms never think about how their E&O policy is structured, until a claim exposes a detail they did not know mattered. E&O is usually claims-made, and that works differently from the policies most owners are used to.
Claims-made vs occurrence
A general liability policy is usually occurrence-based: it responds to incidents that happened during the policy period, even if the claim comes years later. Most E&O is claims-made: the policy that responds is the one in force when the claim is made, regardless of when the work was done. That difference is the whole game, because it means your current policy, and its continuity, protects your past work.
The retroactive date
Claims-made coverage comes with a retroactive date, the date that governs how far back covered work reaches. Work performed before the retro date is generally not covered, even by a current policy. When a firm has carried E&O continuously, the retro date reaches back to when coverage began. The danger is losing it.
Where firms get caught
Two situations cause problems. Letting E&O lapse, even briefly, can break the chain and drop coverage for prior work. And switching carriers without preserving the retro date can reset it, leaving years of past work unprotected. A claim on an old project then gets denied, not because the work was bad, but because the coverage structure was mishandled.
What to do
When you renew or switch E&O carriers, preserve continuity and the retroactive date, and consider extended reporting (tail) coverage when a policy ends. Continuity matters as much as the limit. A coverage review checks your retro date and makes sure a carrier change does not quietly erase your past.
Questions to ask your advisor
- What is my current retroactive date, and how far back does it reach?
- Has my E&O coverage been continuous, or has there been any lapse?
- If I switch carriers, how do we preserve the retro date through the change?
- Would tail coverage matter if I ended this policy or wound down the firm?
- Am I shopping this on price and limit alone, when the structure also matters?
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