If there is one pair of concepts in liability insurance truly worth understanding, it's this: claims-made and the retroactive date. For professional indemnity cover, this is what determines whether a claim arriving today, from work done years ago, is covered – and it's where most hidden coverage gaps arise when switching insurer. This key article builds up the logic step by step.
- Claims-made cover is tied to the timing of the claim being asserted against the insured – not to the notification sent to the insurer, and not to when the loss-causing act happened.
- The retroactive date determines how far back the currently active policy reaches.
- When switching insurer, carrying over the retroactive date is the key to continuity; when a policy ends, it's the extended reporting period.
Why “When It Happened” Isn't Enough
Professional errors have a particular feature: they often only come to light years after the work was done – a bookkeeping mistake is caught by a later audit, a design error surfaces at the first heavy load. Insurance therefore has to deal with the time lag between the loss-causing act and the claim. The claims-made logic answers this by making the policy that is in force when the claim is asserted against the insured the one that responds – provided the work was done after the retroactive date. Hungarian policy wordings often combine this with a requirement to also notify the insurer of the claim within a set deadline.
The Retroactive Date: The Cover's Back Wall
The retroactive date is typically the start of the first policy that has been continuously maintained. If you have been insured since 2020, and your policies have run continuously with the same retroactive date, then a claim asserted today is covered for work done after 2020. But if, at a switch, the new policy's retroactive date became the switch date itself, work from earlier years fell out of cover – this is the classic, unnoticed coverage gap. That's why the first question at any switch is always: does the new insurer carry over the old retroactive date? The other pitfalls of switching are covered in the switching-insurer article.
What If the Policy Ends?
Under claims-made logic, a claim asserted after the policy has ended is typically not covered – even if the work was done while the policy was in force. This is what the extended reporting period (run-off cover) is for: a notification window that stays open after the policy ends. When closing down an activity, retiring, or changing company form, this is the most important issue to sort out – covered in a dedicated article: extended reporting period.
Not Every Policy Is Claims-Made
To complete the picture: some public liability policies work on a different logic, tied to the timing of the loss-causing act or of the loss itself – the specific policy's logic is set out in its terms. What matters isn't the technical term, but the question every policy requires you to ask: which point in time decides whether a claim is covered? The temporal scope article gives a structured answer to that question – and we can pin down where your own policy fits in minutes at a free consultation.
Example: The 2021 Job
In 2021, Bea incorrectly recorded a client's grant in the books; a 2026 audit uncovers the mistake, and the client then files a claim. The question: which policy pays? If Bea's policies have run continuously since 2020, with the same retroactive date, the policy in force in 2026 responds – this is exactly what claims-made logic is for. But if Bea switched insurer in 2024 and the new policy's retroactive date became the switch date, the 2021 job fell out of cover – regardless of six years of uninterrupted premium payments. Same claims history, two administrative decisions, two opposite outcomes. Which is why we say: in professional indemnity cover, the retroactive date isn't fine print – it is the product.
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