"RETROACTIVE DATE INCEPTION" PLACED CLAIM AGAINST ATTORNEY OUTSIDE SCOPE OF COVERAGE

Professional Liability	Claims Made
Prior Acts	Retroactive Date

A federal trial court held that a member of a law firm was not covered under his firm's professional liability policy by virtue of the function of the retroactive date inception provision in the policy. The court determined that coverage for prior acts had not been purchased, though offered, and that the policy applied only to claims for malpractice alleged to have occurred after the effective date of the policy.

On appeal, a federal court of appeals noted that the law firm's insurance agency had been unable to obtain professional liability insurance for it from usual sources because of the law firm's claim history. The agency then secured coverage, through a series of insurance brokers, from a syndicate at Lloyd's of London.

The record showed that, prior to the effective date of the policy, the underwriter for the syndicate had quoted a premium for malpractice coverage for claims arising out of acts or omissions occurring after the inception of the policy. At the law firm's request, a quote (much higher) was provided for coverage that would include claims arising from prior acts or omissions. The firm ordered and paid for the coverage with the lower premium.

Thereupon, the insurance agency sent a letter to its client stating that the selected coverage applied only to acts or omissions occurring after the date the policy went into effect. It also urged that coverage for prior acts be secured. The court found nothing in the record showing that the client acted on the advice.

A cover note was sent to the law firm that also confirmed the coverage period. Another was provided when the policy was renewed for a second year.

The attorney who claimed coverage had performed the acts for which he was sued three years before the insurance took effect. The court found his contention that the term "retroactive date inception" was ambiguous to be without merit; that the firm was made well aware of its meaning. It also dismissed his claim that his continued involvement with the situation that led to the lawsuit against him brought the matter within the scope of coverage.

The judgment of the trial court was affirmed in favor of the insurance providers and against the attorney claimant.

Colip, Plaintiff-Appellant v. Clare, Defendant-Appellee. United States Court of Appeals for the Seventh Circuit. No. 93-1921. June 9, 1994. CCH 1994 Fire and Casualty Cases, Paragraph 4851.