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Lawyers Professional Liability By definition Lawyers Professional Liability Insurance, also more commonly referred to as legal malpractice insurance, provides attorneys and law firms with liability coverage for financial loss suffered by third parties arising from acts, errors, and omissions in providing professional legal services. Fraud, intentional and criminal acts, bodily injury (BI), and property damage (PD) are excluded from coverage under most general liability insurance policies. However, most of the policies provide coverage for personal injury (PI) perils (i.e., defamation, invasion of privacy) since allegations of such acts occur frequently in the legal arena. As is the case with most professional liability forms, lawyers professional liability policies are written with a claims-made coverage basis.
A policy providing coverage that is triggered when a claim is made against the insured during the policy period, regardless of when the wrongful act that gave rise to the claim took place. (The one exception is when a retroactive date is applicable to a claims-made policy. In such instances, the wrongful act that gave rise to the claim must have taken place on or after the retroactive date.) Most professional, errors and omissions (E&O), directors and officers (D&O), and employment practices liability insurance (EPLI) is written as claims-made policies.
A provision found in many (although not all) claims-made policies that eliminates coverage for claims produced by wrongful acts that took place prior to a specified date, even if the claim is first made during the policy period. For example, a January 1, 2010, retroactive date in a policy written with a January 1, 2010-2011, term, would bar coverage for claims resulting from wrongful acts that took place prior to January 1, 2010, even if claims (resulting from such acts) are made against the insured during the January 1, 2010-2011, policy period.
There are two purposes of retroactive dates: (1) to eliminate coverage for situations or incidents known to insureds that have the potential to give rise to claims in the future and (2) to preclude coverage for "stale" claims that arise from events far in the past, even if such events are unknown to the insured. In the former case, the retroactive date preserves the principle of "fortuity"—that is, the insurer should not be called upon to cover the so-called burning building. In the latter instance, the retroactive date makes policies more affordable by precluding coverage for events that, while insurable, are remote in time.