The retroactive date, also called the prior acts date, is an important part of the E&O insurance policy which is sometimes overlooked. Professional liability insurance policies (including E&O insurance) are mostly sold on a claims made form, rather than an occurrence form which is used for all other lines of business. This means that the E&O insurance policy provides coverage for claims reported during the policy period as long as the negligent act, error, or omissions which gave rise to the claim took place after the retroactive date. The retroactive date therefore effectively determines the beginning of the E&O insurance coverage.
The retroactive date is usually set as the effective date of the first E&O insurance policy you ever purchased, and the retroactive date should be kept the same as long as you continue to purchase E&O insurance. If you fail to renew your E&O policy on time, your retroactive date will probably be reset and you will lose coverage.
This means that, in order to keep your coverage intact, you should always renew your E&O policy on time and verify that your insurance binder contains the right retroactive date.