A contractor's professional liability insurance policy has a retroactive date of January 1, 2020. A claim is filed in 2024 for work performed in 2019. Will this claim be covered?
Correct Answer
D) No, the work was performed before the retroactive date
Professional liability insurance only covers claims arising from work performed after the retroactive date. Since the work was performed in 2019 but the retroactive date is January 1, 2020, this claim would not be covered.
Why This Is the Correct Answer
Professional liability (errors & omissions) policies are 'claims-made' policies that include a retroactive date. Coverage only applies to work performed on or after the retroactive date. Since the work was done in 2019 and the retroactive date is January 1, 2020, the work predates coverage and the claim will not be paid.
Why the Other Options Are Wrong
Option A: No, professional liability doesn't cover construction work
Professional liability insurance does cover construction-related professional services such as design errors, project management mistakes, and similar negligence. Saying it does not cover construction work is factually incorrect.
Option B: Yes, as long as the claim was filed during the policy period
While it is true that the claim was filed during an active policy period (2024), claims-made policies require both that the claim be filed during the policy period AND that the work was performed on or after the retroactive date. The 2019 work fails the retroactive date test.
Option C: Yes, if the policy was in effect when the work was performed
This describes how occurrence-based policies work — coverage based on when work was performed regardless of when the claim is filed. Professional liability uses claims-made form, not occurrence form, so this reasoning does not apply.
Memory Technique
Claims-made: think of a 'window.' The retroactive date is when the window opens. Any work done before the window opened is not covered, even if you file the claim while the window is still open. 2019 work = before the window opened Jan 1, 2020 = not covered.
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