In the course of running a small business, you might find yourself liable for a claim of bodily injury, property damage, or professional negligence. And sometimes, this claim will be filed well after the time in which the incident occurred.
Say, for example, that you’re a home inspector. You find out a client has closed on a house you inspected in 2019, but that’s not good news, because the chimney is home to a family of raccoons. You’ve had the same insurer since 2015, and your current policy extends from January 1 to December 31, 2020. However, the family is only now suing you for professional negligence and the cost of the chimney cleanout.
Are you covered?
It all depends on your retroactive date. To understand what this means and whether or not you’d be covered in the event of a scenario like the above, read on.
Policy period 101
A policy period is the term over which your policy provides coverage. Your policy might last for just an hour, or you might have a policy that covers you for an entire year. Because it’s a window of time, you might also see us refer to it as your ‘policy window.’
In general, you can’t take out coverage for an incident that’s already taken place. Are you a clown whose high-flying hijinks toppled another entertainer’s harp at a toddler’s birthday party? You can’t take out insurance this week to cover your liability for property damage last week.
However, when you already have general liability insurance and professional liability insurance, it can apply to claims that were filed before or after your current policy period—under some circumstances.
Let’s take a look at two ways your insurance can provide coverage beyond your policy:
- An exposure period
- Your retroactive date
Next, we’ll take a closer look at both.
Exposure period 101
An exposure period provides coverage against liability beyond (after) your initial policy period. With Thimble, for example, if a claim is filed in the year after your completed work, you’ll still be covered, as long as the event in question took place during your policy period.
Let’s look at two examples:
You’re likely covered if…you’re a tutor who worked with a student on their LSATs throughout the summer of 2019. Your work is seasonal, so your nine-month policy ended with the end of application season in January 2020. Should your client bomb the test and be rejected from 20 law schools in March 2020, they could sue you for professional negligence today. However, if your insurance carries an exposure period, you may still be covered because your completed tutoring work in 2019 fell within your policy period.
You’re not covered if…you’re a Santa performer who also works seasonally. You’ve had the same insurer for a decade, and you activate your policy in December each year. In 2019, though, you were invited to a Thanksgiving day parade. Sadly, you smashed into an elf while mounting your float. At the time, they told you it was “no biggie.” Should they sue you now for medical costs related to their enduring shoulder pain, you would be liable: your policy was not active in November.
You’re also not covered if…you worked as a hiking guide in early 2019. In an incident you don’t like to discuss, you threw a client’s backpack off a cliff. You got out of that line of work and ended your policy just after. They were peeved then, but for some reason, waited until now to sue you for property damage. You no longer carry insurance, and your exposure period ended last month.
Seasonal workers who start and stop policies may or may not be covered from liability for a given incident, depending both on whether the incident took place during their policy period, and on when the claim was filed (before or after the end of their exposure period).
But I’m loyal to my insurer! You say. Why wouldn’t I be covered? It’s because you didn’t have continuous coverage.
To understand this principle, we’ll need to discuss retroactive date insurance.
What is a retroactive date?
Your retroactive date is the date on which your coverage begins.1 It is usually the same as your inception date or the date since which you’ve held continuous insurance coverage.
If you’ve had insurance since 2010, and you still have insurance, you could be covered for incidents that fall well outside your current period—as long as they took place after 2010 when you first got covered.
Let’s look at an example here, too. Imagine you’re a CrossFit coach who’s held professional liability insurance since February 9, 2015, and that’s your retroactive date with your current insurer. One client complains about his bad back in every session, and you give him specific advice on the form he should maintain to keep it healthy and even improve his pain. In 2020, should he suddenly make two claims related to incidents in 2017 and in 2019—well, you’d be covered for both!
That’s right: even if you’ve switched insurers, as long as you’ve had continuous coverage, your retroactive date could remain the same.
Tip: Not sure of your retroactive date? Check with your insurer to find out today.
The beauty of continuous coverage
As you can see, insurance companies provide a strong incentive to get covered. With continuous coverage:
- Your retroactive date is (usually) the first date you got coverage
- If you have an active policy, you’ll still be covered against new claims regarding incidents in the past
- You can rest easy knowing your businesses is protected from risk in the past, present, and future
Think you don’t need insurance coverage right now? If you’re a small business owner, the costs of continuous coverage likely outway the costs of an expensive claim. Now that you get this useful insurance terminology, you can get Thimble.
Even if you don’t have a current insurance policy, it’s never too late to start. After all, an incident could occur in the course of your work tomorrow—and without active insurance, you wouldn’t be covered.
Thimble’s general liability insurance protects small business owners against claims of bodily injury, medical costs, and property damage. Professional liability insurance protects you against claims of errors or negligence related to your professional services.
With fast, flexible insurance from Thimble, make today your retroactive date.
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.