I'm coming up on my due date for my E/O insurance. I don't carry much anyway and in this crappy economy I'm considering dropping it altogether. I didn't have it for 14 yrs before in MI, but have the past 4 in AZ.
In discussion with my agent he tells me that "...you don't want a lapse in effective date, or you'll lose protection for all prior work..".
I'm thinking "huh, I paid when I was working on those jobs, so they are covered - right"
As it turns out all coverage is based on date of claim, not the date you complete the work. They could be 5 yrs apart. That is why the effective date and not having a lapse is so important. At least in his mind, and my guess is that is the way it is. If it lapses for one day, all prior work is no longer covered.
I think that's a bunch of legalese BS. Am I the only one who never knew that, even though I probably should have. Or should I look for another agent?
Unfortunately it makes sense to me.
Consider health insurance. Let's say in June 2006 you have health insurance, and you are unknowingly bitten by a tick. You drop the insurance 1 month later.
Fast forward 5 years, and you begin having symptoms for Lyme disease. By sheer luck, you are able to trace the contraction for Lyme to June of 2006.
No health insurer would fulfill a 5 year old claim like that.
Your Agent has it right. Plus the analogy of Health Insurance is the correct one to make. When your insurance is dropped or lapses, you have no coverage. It does not matter if you had coverage when the original act, error or omission occurred.
Now for most insurance companies it is true that after you have coverage for a certain period of time they will go back in time and extend coverage to those projects. But if you let it lapse for even one day, sorry dude, out of luck.
If you think about taking your chances and not worrying about it, that is your choice. But I know of one company that let their coverage lapse. One month later they got a big contract that required the insurance so they picked up coverage again. Within the next month they had a claim for work on a previous project. No coverage.
Oh and one other goodie to remember. Once you start work on a project, you can't go back and get coverage or increase your limits for that project. You can do those things before you start work; but, not after.
Larry P
Larry,
When I restarted my LS business recently after working a couple of years for another firm, one of the things I did was to go to my former E/O insurer to restart coverage.
One of the things we negotiated was prior acts coverage, which allowed for insuring against claims from work I performed prior to the current policy. It was affordable to do so in my case as much of my work was very low risk types of services. Perhaps not so for others.
Anyways, this seems to contradict your statements and thought I would provide a counter perspective.
You can get what they call "prior acts" coverage....it's just another fee to be negotiated.
This is something to consider when deciding to change insurance carriers.
Well it does make sense in some ways. I don't really buy into the notion of a "pre existing condition" per se, but I can see where projects that go on for many years would require continual coverage as terms of a contract. Key word 'terms of the contract'. But to incorporate that into the policy for somebody (a firm) who does mostly smaller jobs seems a bit overboard.
I just don't have any of that long term work, never have, and likely never will. I'm only doing construction staking the past couple years because I have to, and that is a repeat client. And it seems staff surveyors of bigger out of state/town firms get to do the large scale surveys (often times quite questionably I may add).
I just don't really feel like filling out their 12 page form, but guess I should.
However, I do feel that the day anybody makes a certain decision pertaining to their professional opinion "because they have insurance" is the day they should hang up their license. Another topic.
Thanks for the input
> Larry,
>
> When I restarted my LS business recently after working a couple of years for another firm, one of the things I did was to go to my former E/O insurer to restart coverage.
>
> One of the things we negotiated was prior acts coverage, which allowed for insuring against claims from work I performed prior to the current policy. It was affordable to do so in my case as much of my work was very low risk types of services. Perhaps not so for others.
>
> Anyways, this seems to contradict your statements and thought I would provide a counter perspective.
I think the key in your case was doing everything before getting the policy.
The most important thing about this type of insurance is having a really good agent and working with them every step of the way. If you think you are about to do something that might have an affect, call them. In many ways working with a real insurance professional is very much like working with a land surveying professional. Get to know your agent and develop a real business relationship.
Larry P
It is another reason for not switching carriers too! Jp
My insurance rep explained everything to me the same way. He did say that I could pay for some kind of a past acts policy. I don't know what the term is but essentialy if I stop insurance today and I pay them for this buy-out policy or whatever he called it, I would still be covered on everything performed up until I dropped coverage subject to the statute of limitations (which is different in each state). He explained the whole PA law to me but it kind of went over my head a little. I know that it is tied to the completion of construction and not necessarily the date of work.
> It is another reason for not switching carriers too! Jp
If you have a good agent and good standing with your previous carrier, most new policies will continue the coverage you had with the previous carrier. Assuming of course that you do not let the coverage lapse.
If on the other hand you have been dropped by a carrier because you have so many claims you are a bad risk, that is required information on any new application.
Larry P
> My insurance rep explained everything to me the same way. He did say that I could pay for some kind of a past acts policy. I don't know what the term is but essentialy if I stop insurance today and I pay them for this buy-out policy or whatever he called it, I would still be covered on everything performed up until I dropped coverage subject to the statute of limitations (which is different in each state). He explained the whole PA law to me but it kind of went over my head a little. I know that it is tied to the completion of construction and not necessarily the date of work.
As I understand it this is called a "run off" policy. Anyone looking at retiring should have a serious conversation with a good agent about coverage that continues with the liability. Just because you retire does not mean folks quit filing law suits.
Larry P
Around here we record a notice of completion after a construction contract is finished. This starts the mechanics Lien clock running. I do not know if it has anything to do with professional liability. I do know bonding companies use it to know when to release bonding..