In the area of civil liability insurance, the concept of prior acts is of crucial importance and should be carefully analyzed by brokers.

Civil liability insurance policies that operate on a “claim submitted” basis (like professional civil liability policies) contain very specific clauses. In general, this is not the case for “event-based” civil liability policies.

However, in connection with business start-ups, some insurers are beginning to impose “prior acts” exclusions within general “event-based” civil liability policies, particularly for entrepreneurs.

This new trend poses no problems for an initial insurance policy when a new company has been recently created and has never carried out any work. Furthermore, by adding this exclusion when a new insurance policy comes into effect, the insurer is emphasizing that only events caused by work performed after the policy comes into effect will be covered.

Such an exclusion could also be imposed in the event of an insurance interruption or if a business owner undertakes new activities that were not previously insured.

However, in the case of a policy renewal or new business for your firm (assuming that the insured had prior insurance without any interruption), this exclusion rider should never be accepted by the broker.

In other words, the insurance policy must absolutely cover damages related to events that occur after the policy’s effective date but that were actually caused by previously completed work, i.e. prior to the policy’s effective date.

Therefore, brokers must be vigilant in this regard. They should check the details and ensure that this rider was not included in the quotes submitted by a client’s insurers.

In most situations, the danger is that a quote containing this exclusion may well be less expensive and could thus prompt brokers to recommend it to their clients without actually being aware of the risk their clients are exposed to.

If you have any questions on this topic, please contact Richard Giroux, CIB, Director, RCCAQ Insurance.