Retroactive Cover and the importance of continuous Professional Indemnity Insurance

Introduction

As we pass the one year anniversary of partnering with BMS for our Member Insurance Program, with insurance that is now linked to membership renewal dates, we are beginning to see instances of lapsed insurance: membership hasn’t been renewed by the due date and therefore insurance has lapsed as well.

This is a very worrying occurrence as a lapse in insurance can also affect the retroactive date of your policy. “What is that and what does it mean?” I hear you ask.

We approached our insurer, BMS Group, to provide an explanation of retroactive cover and why it is important to keep your insurance continuous.

How Retroactive Insurance Cover works and why it's important

by BMS Group

It is important to understand how retroactive cover works under your PAA Professional Indemnity (PI) Insurance Policy. Any claims that arise from events prior to this date will not be covered by your insurance.

The retroactive date on the PAA PI insurance policy is the date from which continuous coverage was first held. For example, if you have held a PI Insurance Policy through another insurer, the retroactive date will match the date on which you first held a Claims Made PI Insurance Policy.

If you did not have insurance coverage in place at the time you purchased the PAA PI Insurance Policy, your retroactive date will be the start date of your PAA PI Insurance Policy. This will be the case if you have had a gap of cover between insurance policies, or if you have not previously held insurance.

The following two examples illustrate the effects of having retroactive cover:

Member that has held continuous cover:

  • On January 1st 2017 you take out a PI insurance policy with another insurance provider.
  • On January 1st 2019 on renewal you transfer your PI insurance policy to BMS.
  • There is no gap in the insurance cover and as such, the retroactive date on your BMS policy will be 1st of January 2017.
  • On 1st of February you have a claim notification from an event that occurred on 1st February 2017
  • The BMS policy will respond to the claim as the claim happened after the retroactive date.

Member that has had a gap in cover:

  • On January 1st 2017 you take out a PI insurance policy with another insurance provider.
  • On January 1st 2019 your policy falls due for renewal, however you let the policy lapse and do not renew straight away
  • 3 months later on April 1st 2019 you take out the BMS PI policy.
  • There has been a gap in the continuous cover and as such, the retroactive date on your BMS policy will be 1st April 2019
  • On 1st of May 2019 you have a claim notification from an event that occurred on 1st February 2017
  • The claim is not covered as the event occurred prior to the retroactive date.

Professional Indemnity Insurance (PI) protects you against liability or allegations of liability for financial injury or damages that have resulted from a negligent act, error, omission, or malpractice that has arisen out of your professional capacity as a Pilates Instructor.

Circumstance and human nature suggest that this type of claim may not arise until months or sometimes years after the event in question takes place.

It’s therefore extremely important to ensure you renew your PAA PI Insurance Policy on time to avoid any gaps in cover. Which in turn, also means renewing your membership on time.