Claims-Made, Retroactive Dates and Run-Off: How a PI/E&O Policy Actually Responds

Why PI/E&O is "claims-made"

A professional indemnity policy responds to claims that are made against you and reported to the insurer during the policy period — not to when you actually did the work. This is the single biggest way it differs from most other insurance.

It works this way because professional mistakes can take years to surface. A design flaw, a tax error, a line of code — the loss may only appear long after the job is done. Claims-made cover ties protection to the moment the problem lands on you, which is why two dates then matter enormously.

The retroactive date, in plain terms

The retroactive date is the earliest date from which your past work is covered — a claim is paid only if the work was done on or after it, and the claim is reported while the policy is live.

An example, without numbers. A consultant first buys cover, setting a retroactive date. Years later a client alleges an error in work done after that date. Because the work falls after the retroactive date and the policy is active when the claim is reported, the current policy responds. Had the work pre-dated the retroactive date, it would not. The date is the boundary of your past, and it travels with you only if you protect it.

Why switching insurers can quietly wipe years of cover

When you move to a new insurer, your retroactive date can be reset to the new start date — and if it is, every claim arising from work before that date falls outside cover, even though you were insured at the time.

This is the gap most buyers never see, because it lives in a single field on the schedule. The protection is simple: keep cover continuous with no break, and insist the new policy carries forward your original retroactive date. A cheaper renewal that resets the date is rarely cheaper once you count the years of work it drops.

Run-off: cover after you stop trading or sell

Run-off cover (sometimes called an extended reporting period) lets you report claims that arrive after your policy ends, for work you did while insured — essential when you retire, sell or close the business.

Without it, a claim that surfaces a year after you wind down lands on you personally, with no live policy to answer it. Because professional claims are long-tailed, run-off is not an afterthought for an exiting owner — it is the difference between a clean exit and a lingering personal exposure.

What to check on your schedule before a notice lands

Before any claim arrives, confirm three things on your policy schedule: your retroactive date, that every trading entity is named as an insured, and whether defence costs sit inside or on top of your limit.

These are quiet clauses with loud consequences. An entity left off the schedule may have no cover; defence costs inside a thin limit can be swallowed before a settlement; a misaligned retroactive date can void an otherwise valid claim. Ten minutes with the schedule now is worth a great deal later. Our checklist for judging a policy walks through each of these.

When a notice arrives: what actually happens

When a client's notice or legal letter arrives, you tell your insurer at once; the insurer investigates, appoints lawyers and works towards a resolution, with covered defence costs and any settlement paid up to your limit. If you want your professional indemnity cover set up with that kind of claims support, that is what we do.

In India that first contact is often not a court summons at all but a legal notice or a "deficiency in service" complaint before a consumer commission under the Consumer Protection Act, 2019 — which is why early reporting matters. This is the moment a broker earns their place: at Ethika, our Red Carpet claims team takes on the notice and works it alongside you. We describe that as effort and advocacy — staying with the claim until it is settled — not as a guaranteed outcome, because no honest broker can promise a result. Statutory reference to be confirmed by counsel before publication.