The conditions of modern insurance allow you to apply various ways to cover potential losses. One of the methods used is the insurance of the past tense - the so-called insurance in the retroactive period. This type of compensation is used in contracts concluded between legal entities in various fields of economic activity.
What is a retroactive period?
Retroactive period is the term of the insurance policy agreed by both parties. The insurance period begins on the dates preceding the date of conclusion of the insurance contract and ends with the date of issue of the policy. All insurance events arising during this period are covered from the amount of insurance compensation.
Typical clauses in an insurance contract
In insurance contracts, the retroactive insurance period is a time factor on which the payment of compensation for the event that occurred before the signing of the contract depends.
There are two types of such a period:
- The annual base of the contract. In this case, the date of the report of the insurance period begins from the moment the organization is allowed to perform work. Damage covered in the event of an insured event shall be caused no earlier than three years before the insurance period.
- Design basis of the contract. The retroactive period is counted from the start of work.
Claim handling
The priority area of implementation (retroactive insurance) is construction, financial risk insurance.
The essence of compensation is to compensate for losses that have been identified in the work already completed. True, this rule is valid only if, at the time of issuing the insurance policy, the beneficiary did not know about the existing miscalculations and should not have known (did not receive letters, orders or memos on the fact of discovering the deficiencies).
The issue of incorporating the past period into insurance coverage has been repeatedly considered by arbitration courts. But the basic rule says that the retroactive period can be considered as such only with the agreement of the parties. Even if the parties assume the existence of such an item, but do not include it in the insurance conditions, compensation for losses may be refused.
If the insured person was aware of the miscalculations made, nevertheless bought a policy, then such actions are regarded as fraud.