Professional liability and errors & omissions

Claims-made, and why the retroactive date matters more than the limit

Almost all professional liability is written claims-made. It responds only if the claim is first made against you while the policy is in force — not, as with an occurrence policy, whenever the mistake actually happened. That single difference produces most of the traps in this product.

The retroactive date is the earliest date of your work that the policy will cover. If your retro date is 2021, work you did in 2019 is not covered even if the claim arrives today while you are fully insured. Keeping the retro date intact when you change carriers is the most important thing in moving this policy, and it is the thing a cheap quote most often quietly resets.

Which is why we will tell you when not to move. Saving four hundred dollars while resetting a retro date back to today, and stripping cover from six years of past work, is a terrible trade — and it is exactly the trade an incomplete comparison produces.

Tail cover, for when you stop

Because the policy responds to claims made during its term, letting it lapse ends cover for everything you have ever done. If you retire, sell the business or simply stop, you need an extended reporting period — tail cover — which keeps the ability to report claims open for a set number of years afterwards.

Tail is usually priced as a multiple of the annual premium and has to be bought within a short window after the policy ends. It is not something to discover afterwards. If you are contemplating retiring or selling, that conversation belongs on the agenda a year ahead, and we will raise it rather than wait.

What it covers, and the exclusions to read

Negligent acts, errors and omissions in the professional services described in the policy — and that description matters. A firm that has expanded from bookkeeping into advisory work, or from design into project management, may be operating outside the services its policy names. Tell us when the business changes shape.

Standard exclusions include dishonest and fraudulent acts, bodily injury and property damage (which belong on the general liability), contractual liability you assumed beyond your professional duty, and, on many forms, prior known circumstances — anything you were already aware might give rise to a claim when you bought the policy. That last one has to be disclosed at application, honestly.

Who needs it more than they think

Anybody who signs off on numbers, drawings, filings or recommendations. But also: IT and web firms, where the work is technical rather than advisory but a failure costs the client money; marketing agencies, where copyright and advertising claims arrive; and real estate professionals.

Increasingly it is also a contractual requirement rather than a choice — clients and public bodies commonly require professional liability at stated limits before engaging a firm at all. If you are bidding for work with any institutional client, you will meet this requirement, and buying it under deadline pressure is more expensive than buying it in advance.