What does “full prior acts” mean in insurance? And what are the implications to your business of having a liability policy with this coverage in it?
Full prior acts (FPA) is a type of claims made liability insurance coverage. Full prior acts means that covered claims made during the policy period may arise from acts that occurred during, and at any time prior to, the policy period.
In fact, if you have full prior acts coverage, doesn’t matter how far back the act occurred for it to be eligible as a covered claim.
FPA is in contrast to a “retroactive date“.
A retroactive date in a liability policy limits claims made during the policy period to claims that arose from acts that occurred after the retroactive date.
As such, having a retroactive date in your liability policy is a type of exclusion for acts that occurred prior to that date that could give rise to a claim in the future.
Full Prior Acts vs. Retroactive Date
Let’s say you have a professional liability policy with a policy term of January 1, 2020 to January 1, 2021 and the policy has a retroactive date of January 1, 2015.
If a covered claim is reported during the policy period, and the claim arose from an act that occurred sometime in 2014, you would not have any coverage for it because the act would have fallen before the retroactive date.
However, if you have FPA coverage on your professional liability policy (aka “errors and omissions” policy) and a covered claim is made within the policy period from an act that occurred in the year 2001 (or anytime in the past) it would be eligible as long as it’s covered under the terms of the policy.
So as you can see, it’s preferable to have full prior acts coverage.
But insurers typically don’t want to provide FPA unless you’ve already had insurance and that you’ve kept insurance in place – uninterrupted – for the entire life of your company, or for whatever period it is that you are trying to cover.
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