Retroactive cover refers to coverage for services undertaken previously i.e. prior to the policy start date.
Professional indemnity insurance will include an exclusion whereby any claims relating to services provided prior to the ‘retroactive date’, as noted on your policy schedule, are excluded.
This is important as for the majority of professional negligence claims it is possible for a claim to be brought against you for services provided up to 6 years ago. For example a bookkeeping error which is not realised until HMRC open an enquiry.
There are certain circumstances in which the time limits would differ if the negligence only becomes apparent at a later date. It is possible to bring a claim outside the six-year limitation period if the damage complained of was not discovered until after the expiry of this period. This is known as 'latent damage', and in these circumstances the claimant has three years from either the date of knowledge of loss or the date when it ought to have reasonably known about the loss. What constitutes what 'ought reasonably to have been known' depends on the circumstances of the case, and specific advice should always be sought.
There is a final time limit of 15 years from the date of the defending party's negligent act or omission.
Professional Indemnity insurance operates on a ‘claims made’ basis which means it is the policy in force at the time the claim is made, for example when the negligence proceedings are brought against you, that will react to the matter and not the policy in force at the time of the negligent act. This is not a familiar concept to most contractors as it is not applicable to all insurance policies. For example, notwithstanding the policy terms and conditions, Public Liability will cover you for incidents that occur during the period of insurance, regardless of when a claim is brought. Some policies such as Qdos Tax Liability Cover will automatically cover exposure for previous years.
Therefore if you have undertaken services prior to the policy start date, you should be sure to note the ‘retroactive date’ that will apply to the policy.
If you are an IT professional e.g. IT Contractor, during your Professional Indemnity Insurance application you will be prompted to ‘Cover past work’. If you opt to do so, or if you are not providing IT services and purchase Professional Indemnity insurance, your retroactive date will be shown as “none” on your policy schedule.
This is to say that cover is not limited to acts or omissions the policyholder makes after a specified date and you would be covered, subject to policy terms and conditions, regardless of the date of the negligence act or omission.
If a date is applied on your policy schedule, this means that you are only covered by the policy for work carried out on or after this date.
For Qdos Professional Indemnity Insurance, retroactive cover is provided as standard with all non-IT trades.
For those providing IT services, you can add 'Cover For Past Work' for a small additional premium.
If you are an IT contractor and require cover for work you have undertaken prior to the policy start date, bearing in mind that previous Professional Indemnity insurance policies you may have held would not react after they expire, it would be prudent to select cover for past work. This will be particularly relevant in the following circumstances:
You have had a gap in your cover.
- e.g. if you have failed to renew a Professional Indemnity insurance policy you may have held in the past.
You have changed insurance provider to Qdos from another company.
- Once your policy with your previous provider has expired, it is highly unlikely you will be unable to make a claim should the need arise. As such, you should ensure that your new policy covers you for the time you were insured with another provider.
If you have not previously been insured.
- If you have provided services in the past which require cover under your new policy, retroactive cover must be included.
A breach of confidentiality is when private information is shared with a third party without the consent of the owner of that information.
Professional Indemnity Insurance is a business insurance policy designed to protect your business against claims for financial loss. Find out more.
Professional indemnity insurance reacts in circumstances where you are alleged to have caused a financial loss due to negligence, omission, or error.
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