Have you ever forgotten to turn off the stove, mail a letter, or set your alarm clock? Perhaps you forgot your keys as you were leaving your home or failed to pack your laptop for a business trip?
In the midst of juggling the obligations of daily business, it’s easy to forget to accomplish a task here or there and make up for it later. In the case of renewing E&O insurance, you can’t afford to “forget” because the cost of a gap in coverage could be catastrophic.
Here’s the deal- errors & omissions policies are almost always written on a “claims made and reported” basis. This means that to be covered for a claim, the claim must be made and reported during the current policy period, regardless of whether or not the wrongful act (the error) leading to the claim occurred in the past. Many E&O policies also require that the wrongful act leading to the claim must occur after the insured’s retroactive date. A retroactive date is usually determined by the inception date of the insured’s first continuously maintained E&O policy. In other words, if you let your coverage lapse, even for a single day, you can reduce your retroactive date and be denied coverage for a claim.
Case and Point:
Sue Smith is a life insurance agent who has been in business for 15 years. Although Sue has never had a claim brought against her and does not expect to, she has diligently maintained Life & Health Insurance Agent’s E&O coverage since the inception of her insurance career to protect her business and personal assets.
While planning her summer vacation abroad, Sue became too busy to remember to renew her E&O policy. Upon returning from her trip, Sue realized her coverage had lapsed and immediately contacted her E&O insurance broker to renew coverage. Sue’s new E&O coverage took effect the day she re-applied and Sue felt relieved no claims were made against her during her lapse in coverage.
Six months after Sue purchased her new E&O policy, she received a complaint from a customer who purchased a life insurance policy from her several years earlier. When Sue submitted the claim under her current E&O policy, the claim was denied due to a “gap” in E&O coverage. Although Sue had proactively maintained E&O coverage for 15 years, she was not covered for the only claim ever brought against her because she had let her coverage lapse. Sue is now liable for legal and settlement fees associated with the claim.
In Sue’s case, and like so many other busy insurance professionals, creating a gap in E&O coverage was easier than Sue realized and more detrimental than she anticipated.
The good news is there is an easy way to help avoid a gap in coverage. Use an automated E&O renewal reminder to ensure you maintain continuous E&O coverage.
All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CalSurance Associates, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.
