What is a Retroactive Date in Legal Indemnity Insurance?

Even if you are the best lawyer and have years of expertise and skills, mistakes can happen. If any of your clients file a case against you, you would have to pay not only the compensation amount (of course, if you lose) but also have to incur the legal expenses. Therefore, it is essential to purchase a legal indemnity insurance policy to get coverage in case a claim is filed against you by your client.

Further, while buying the insurance policy, make sure to add the retroactive date to it.

The retroactive date in legal indemnity insurance is the date from which you have been holding the uninterrupted legal indemnity insurance or the date in the past from when the insurer agrees to cover you. Any loss or damage which is occurred before the retroactive date will not be covered by the legal indemnity insurance company.

In general, the retroactive date is the date on which your legal indemnity insurance will begin. It means you will be covered for those events which cause injury or damage to a third-party that happen on or after the retroactive date as long as the claims are filed when your legal indemnity insurance is still active.

Adding A Retroactive Date to A New Legal Indemnity Insurance

If you are thinking to purchase legal indemnity insurance and keen to cover that work as well which you have completed previously, some insurers let you do so. For instance, you can take out a legal indemnity insurance on 2nd April 2018, but agree to add a retroactive date as 1st January 2018, when you first start doing work.

The retroactive cover says that work you completed before you purchase legal indemnity insurance can be covered as long as it is covered after the retroactive date. However, the policy should be active at the time of making a claim.

While retroactive date can be added to a new legal indemnity insurance policy, it depends on the whims of the insurer. Bear in mind; the insurer can refuse to add a retroactive date if it believes that you are expecting to face a hefty claim for your previous work.

Read more: Buying Professional Indemnity Insurance 5 Mistakes Avoid

Importance of Retroactive Date Cover

Having a retroactive date cover on your legal indemnity insurance is necessary because it can take months or years to discover problems with the work. For any mistake which has taken years to surface, a person can be sued for that error as well.  A retroactive date allows the policyholder to rewind the time and fix the mistakes which happened in the past. The retroactive date is important because, to get coverage by your insurer, it is essential that your insurance should be in place both when the claim happened and when it is reported.

Some Necessary Considerations

  • Keep your legal indemnity insurance cover active all the times by using the retroactive date coverage
  • Although you would have to pay extra premium to get the coverage for retroactive, the premium would be much lower than what you would have to otherwise pay at the time of claim
  • In case you don’t maintain a retroactive date cover, you would have to shell out lakhs of rupees in defending yourself in the court

How Long Should You Keep Your Legal Indemnity Insurance Policy Active?

There is no definitive answer to this, and it entirely depends on your judgement. If the legal case is big or involves hefty amount, you can keep the legal indemnity cover for a longer duration. Here, the important thing to understand is that keeping your legal indemnity insurance cover active for throughout your professional cover will ensure that you are covered for the mistake which could come in the light in the future.

Also read: Professional Indemnity Insurance Worth

If you want to terminate your legal indemnity insurance policy but still want to remain protected from claims filed against you on or after retroactive date, you can go for the extended report period endorsement.

Conclusion

Your purpose of buying legal indemnity insurance is to get coverage against unforeseen events. So, add the retroactive date to your insurance policy and enjoy the comprehensive coverage by covering the past mistakes as well.

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