Most professional liability and E&O policies are written claims-made. The basic mechanic — the policy responds to claims first made during the policy period, not to work performed during it — is only half of what an agent has to understand. The other half is the retroactive date, and it is where the real damage happens.

What the retroactive date does

The retroactive date is the earliest date of work the policy will respond to. A claim has to satisfy both tests:

  • The work was performed on or after the retroactive date
  • The claim was first made against the insured during the policy period

A policy with no retroactive date — often shown as full prior acts — covers work going back to whenever the professional started, as long as coverage has been continuous.

The example every agent should know

An IT consultant has been in business since 2015 and has carried claims-made E&O continuously since then, with a retroactive date of March 1, 2015.

In 2026 the agent moves the account to a carrier quoting $1,400 less. The new policy is issued with a retroactive date of the new inception date in 2026 — not 2015.

In 2027, a client sues over a system the consultant designed in 2020.

  • Claim first made in 2027 — during the policy period. ✓
  • Work performed in 2020 — before the 2026 retroactive date. ✗

The claim is not covered. The consultant never had a gap in coverage; they paid premium every year without interruption. Eleven years of prior work became uninsured because one date on one declarations page changed at renewal.

That is an E&O claim against the agency, and it is a hard one to defend.

The rule that prevents it

When you move a claims-made account, the new policy must carry the same retroactive date as the expiring policy, or grant full prior acts. Verify it on the new declarations page before you let the old policy lapse. Never accept a quote on price without checking this field.

Claims-made vs. claims-made and reported

These are not the same and the difference is not cosmetic. A standard claims-made policy responds when the claim is made against the insured during the term. A claims-made and reported policy also requires the insured to report it to the carrier during the term (or a short window after). A claim received in the last week of the policy period and reported three weeks later can be denied outright on that form.

Why the premium climbs for the first several years

A first-year claims-made policy only has to answer for one year of prior work, so it is cheap. Each renewal picks up another year of exposure, and the premium steps up accordingly — typically for about five years, after which the policy is described as mature. Clients read those increases as a rate hike. It usually isn't; they are buying more years of coverage each time.

When the policy ends

Because coverage depends on the policy being in force when the claim arrives, a professional who retires, sells, or simply drops the coverage has nothing responding to their past work. The fix is an extended reporting period, commonly called tail coverage, purchased at cancellation.

Related: Occurrence form vs claims-made · Tail coverage explained · E&O reference sheet

Educational only — confirm against the actual policy form, the declarations, and the expiring carrier's retroactive date.