Change E&O Companies & Lose Retroactive Protection?

AllenChicago

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During the process of comparing E&O plans in December, my current E&O company (NAPA) inferred that if I left them, and in the future, received an E&O complaint for an Error/Omission that I commited while insured through NAPA, they would not pay it because I would no longer be their customer.

The new carrier wouldn't cover a claim if the error/omission was commited prior to enrolling with them.

Does this ring true? If so, changing E&O companies could be a risky proposition.

-Allen
 
Depends on your policy. Most policies are on a claims made basis, basically the cover incidents based on when the claim is filed, not when the actual incident occured. Others are on an occurance basis, which means they cover claims that happen while you are insured with them during the incident.

Like I said, most E&O policies are claims made, and when you switch E&O carriers, they should give you tail coverage to cover the time you were insured with your previous carrier. Now, if you have a lapse between coverages, there won't be a tail coverage at all, since tail coverage won't cross a lapse.

Confused yet?

Talk to your new carrier and ask the same question. Make sure they will cover you for previous acts that have not been reported yet. Chances are, they will.

Dan
 
As long as you don't have a gap in coverage.

You do need to make sure you go from a claims based policy to a claims based policy. I don't know of a single occurance based E&O policy out there, but I'm sure there are some.

Dan
 
Unless the new policy's retroactive date goes all the way back to the date the cancelled policy started the new policy will not cover prior acts.

There should be a extended reporting period option. Typically, this option is part of the policy language since carriers prefer to have the retroactive date the same as the policy's effective date. There may be options for the length of time to report claims. The longer the time to report claims the greater the premium. The additonal premium is usually a percentage of the expiring premium and the percent amount may be disclosed in the policy language.

Also, there may be policy language that describes a limited period of time for the carrier to make this extension available. Failure to inform the insurance company within the designated time frame allows the insurance company to not offer the extended reporting period coverage. :)
 
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Depends on your policy. Most policies are on a claims made basis, basically the cover incidents based on when the claim is filed, not when the actual incident occured. Others are on an occurance basis, which means they cover claims that happen while you are insured with them during the incident.

Like I said, most E&O policies are claims made, and when you switch E&O carriers, they should give you tail coverage to cover the time you were insured with your previous carrier. Now, if you have a lapse between coverages, there won't be a tail coverage at all, since tail coverage won't cross a lapse.

Confused yet?

Talk to your new carrier and ask the same question. Make sure they will cover you for previous acts that have not been reported yet. Chances are, they will.

Dan

Excellent advice!

You don't want to allow your E&O coverage to lapse any more than allowing your health or Rx coverage to lapse over the dreaded 63 consecutive days....

It's kinda like trying to cross a stream stepping on one rock after another.... until you get to the middle of the stream and find there are no more stepping stones. When you try to jump the rest of the way, you will more than likely end up getting wet. Plan ahead!
 
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