What happens if the retroactive date on my nursing home policy is wrong?

On a claims-made policy, two things must both be true for coverage to apply. The claim must be first made and reported during the policy period, and the incident giving rise to it must have occurred on or after the retroactive date shown on the declarations page.

A retroactive date that reaches back to the inception of your first continuous claims-made policy is described as full prior acts or a continuous retro date. That is the structure you want, and it is what makes claims-made coverage behave, in practice, much like occurrence coverage as long as you keep renewing.

The failure happens at a carrier change, and it is quiet. A program moves to a new market, often at a better premium. The new carrier issues a policy with the retroactive date set at the new inception rather than matched to the prior one.

Nothing on the declarations page looks wrong. The limits are the same or better. The premium is lower. What has actually happened is that every year of operations before that new inception date is now outside the coverage, and no policy answers for it, because the old claims-made policy also stopped responding when it expired.

In a hard market where operators change markets more often than they used to, this is no longer a theoretical exposure. It is one of the most common serious defects found when a senior care program is reviewed.

The gap between an incident and a lawsuit in this industry can be long. Statutes of limitation vary by state and by theory, and in some circumstances they run from discovery rather than from the event. A family may not pursue a claim for a considerable period after a resident death, and a survival or wrongful death action may be brought by an estate that took time to open.

That means an advanced retroactive date does not create an obvious problem in year one. It creates a problem that surfaces later, at which point the fix is no longer available.

Find the retroactive date on the current declarations page. Then find the inception date of your first claims-made policy in this program, going back through prior declarations pages. If the retroactive date is later than that inception date, and there was no deliberate decision plus a purchased tail on the older policy, you have a gap.

Do this at every renewal, not only at a carrier change, because a retro date can also advance on a renewal with the same carrier if the policy is rewritten under a different form or entity. And check it for each named entity, since a multi-entity operator can have different retro dates across the schedule.

The preferred fix is to have the new carrier match the prior retroactive date. That is often available, and it is one of the most valuable things to negotiate in a senior care program because it costs far less than the exposure it removes.

Where a market will not match it, the alternative is to buy tail coverage, formally an extended reporting period, on the expiring program before it lapses. That keeps the earlier years reportable under the old policy. What is not an acceptable answer is accepting the advanced date and moving on, because the resulting gap is permanent and grows more expensive to discover the longer it goes unnoticed.