The sun is shining, the birds are chirping, the temperatures are warming and nature is beginning to bloom. All sure signs that spring has arrived! This is the time of year to purge old file information and to start the spring cleaning process – but wait!
Before you start cleaning ‘house’ and purging old document files, do keep in mind the importance of maintaining prior Errors and Omissions Certificates. An agent may think that since the Errors and Omissions Certificates are years old and may just be taking up space the certificates are no longer needed since the agent has their most current Certificate of Insurance. However, at the time of a claim, an agent will need to provide proof of prior, continuous Errors and Omissions coverage to the claim department handling the matter so that a prior acts retroactive date can be determined.
Errors and Omissions policies are issued on a Claims Made basis. Simply stated, in order for a claim to be considered by the claim department, the activity causing the claim, i.e., the sale of a life insurance policy, must have occurred on or after the Prior Acts Retroactive Date of the agent’s Errors and Omissions coverage. Prior Acts coverage is provided as far back as an agent has maintained prior, continuous Errors and Omissions Coverage.
Recently, an agent filed a claim stemming from the sale of a life insurance policy occurring in early 2000. While the agent was able to demonstrate proof of current Errors and Omissions coverage, the agent was not able to provide proof of continuous Errors and Omissions coverage from the date of the sale of the life insurance policy in 2000 continuously through to the present, even though the agent indicated they had maintained coverage since that date of the activity causing the claim. As such, the claim department was unable to verify the agents’ prior acts coverage and had to deny a claim based on the fact there was not sufficient prior acts coverage in place.
Being a prudent agent, you have taken the necessary steps to maintain this important and valuable coverage and just as important is maintaining the certificates of insurance. A sound business practice for an agent should be to maintain a file, whether paper or digital, that includes copies of all certificates of Errors and Omissions insurance purchased. Additionally, be sure to maintain contact information of the company you purchased the Errors and Omissions insurance from in the event you are unable to locate a Certificate of Insurance so that you can later contact the company to obtain. In the event you ever need to file a claim with your current Errors and Omissions insurance provider, you will have the necessary Certificates of Insurance to demonstrator Prior Acts Coverage to the claims department.