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 legal expenses. Therefore, it is essential to purchasing a legal indemnity insurance policy to get coverage in case a claim is filed against you by your client. So what is a Retroactive Date in Legal Indemnity Insurance?
While buying the insurance policy, make sure to add the retroactive date to it.
The retroactive date in 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 indemnity insurance company.
In general, the retroactive date is the date on which your legal indemnity insurance will begin. It means the policy will cover those events which cause injury or damage to a third party that happens on or after the retroactive date as long as you file the claim when your 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 are keen to cover that work as well which you have completed previously, some insurers let you do so. For instance, you can take out 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 you can cover the work you completed before you purchase legal indemnity insurance. However, the policy should be active at the time of making a claim.
While you can add retroactive dates to a new indemnity insurance policy, it depends on the whims of the insurer. 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.
Importance of Retroactive Date Cover
Having a retroactive date cover on your legal indemnity insurance is necessary. It can take months or years to discover problems with the work. For any mistake which has taken years to surface, a client can sue the professional 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 time by using the retroactive date coverage
- It is possible that you would have to pay an extra premium to get the coverage retroactive. But 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 involves a hefty amount, you can keep the legal indemnity cover for a longer duration. One should keep the legal indemnity insurance cover active throughout the professional cover. It 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.
Your purpose in buying legal indemnity insurance is to get coverage against unforeseen events. So, by adding the retroactive date to your insurance policy you can cover your past mistakes.