My Predecessor Firm – Does my Professional Liability policy cover it?
There are a few factors to verify with your insurance company with regards to your predecessor firm.
The first and probably the most important factor to determining if your previous firm or firms name is covered under the policy is the retroactive date. What is the date that your insurance company has on the policy for your architect/engineer firm? If your policy states that your firm has ‘full prior acts’ then the predecessor firm does have coverage with regards to the retro date. If there is a specific date, such as 8/1/2010, listed on the policy and your previous firm was active prior to that date then there is not coverage under the retroactive date. It is vital that you know your retroactive date for previous firm or firm names under the Professional Liability policy.
Another factor to review with your agent is if the insurance company automatically covers predecessor firms or do they need to be specifically named. This will depend on the definition in the policy typically under ‘insured’ meaning. Some insurance companies will require that each predecessor firm is listed by endorsement on the policy. This includes if your firm name changes from an LLC to and Inc. If you do need to list them on the policy be sure that you list all variations of your firm name so that if a claim comes up from a past firm name there is coverage on the policy.
Also, check the definition in the Professional Liability policy so that you are aware of how a predecessor firm is defined. Here is an example:
Predecessor firm means any design firm (partnership, professional association, limited liability partnership, sole proprietorship, limited liability corporation or corporation) as of the policy period inception date in Item 3 of the Declarations, which has undergone dissolution or is inactive and no longer providing professional services, and at least 51% of such firm assets and liabilities have been assigned, acquired or transferred to the Named Insured.
This definition can vary with each insurance company, be sure your firm has an understanding of the definition.