Prior Acts Clause
The prior acts clause sets a retroactive date before which wrongful acts are excluded from cover, regardless of when the resulting claim is actually made.
- Clause type
- Condition
- Origin/Market
- International programme
- Favours
- Insurer
- Negotiability
- Negotiable
Purpose
Under a claims-made policy, it is essentially the timing of the claim, not of the wrongful act itself, that determines the temporal scope of cover. Without a time limit this would create uncalculable exposure for the insurer, since very old conduct could also be caught. The prior acts clause limits this exposure by setting a retroactive date: only wrongful acts committed on or after that date are covered.
Effect and limits
When a claims-made policy is first taken out, the retroactive date is usually set to the policy inception date (“no prior acts”); with each subsequent uninterrupted renewal it can be held constant, effectively reaching further and further back until, ideally, “full prior acts” coverage from the start of the insured activity is achieved. Switching to a new insurer carries the risk that the new carrier insists on a later retroactive date — conduct between the old and the new date would then remain permanently uncovered, even though no gap exists in continuous policy periods themselves.
Negotiation and practice
On a change of carrier, “full prior acts” (also called “nose coverage”) to the existing retroactive date should be actively negotiated; insurers generally grant this without a material premium loading where continuous prior cover can be demonstrated. If a later retroactive date is nonetheless accepted, it should be checked whether a separate extended reporting period with the previous insurer can close the resulting gap.