Short answer
Professional liability reinstatement is usually possible after a cancellation for non-payment, but a lapse on a claims-made policy is more than a billing problem. It can break continuous coverage. Carriers often ask for a signed no-loss statement and a payment, and some reinstate with no gap while others may not. Never sign a no-loss statement if you know of an incident, and ask your broker first.
What happens when a policy is cancelled for non-payment?
A carrier typically sends a notice of cancellation when a payment is missed. The notice usually states a date by which payment must arrive, and some policies or state rules provide a grace period. The notice and your policy control the timing, so read both right away.
If the date passes, the policy can cancel. Coverage may end as of the cancellation date, and the terms depend on the policy and carrier.
How does professional liability reinstatement work?
A small design firm came to us after its policy was cancelled for non-payment. To reinstate, the carrier asked for a signed no-loss statement and a payment. The firm asked: “Does this amount look right to you? Should we sign and pay?”
Reinstatement generally involves a few pieces:
- A payment: The carrier states the amount needed to bring the policy current.
- A no-loss statement: You confirm that nothing happened during the gap, sometimes called a no known loss letter.
- Possible gap in coverage: Some carriers reinstate with no gap, and others may leave a gap between cancellation and reinstatement.
Terms vary by carrier. Ask exactly what the reinstatement date will be, and get it in writing.
Should you sign a no-loss statement?
Only if it is true. A no-loss statement asks you to confirm that you know of no claims, incidents or circumstances during the lapse. Do not sign it if you know of an incident, a dispute or a demand. Talk to your broker first, because signing something inaccurate can put coverage at risk.
If something did happen, tell your broker before you respond to the carrier. That way you can decide how to report it correctly.
Why do lapses matter on claims-made policies?
A claims-made policy responds to claims made and reported while the policy is in force, subject to its conditions. Keeping coverage in place without a break is called continuous coverage. A lapse can interrupt it.
That can affect your retroactive date. If a new policy starts after a gap, the carrier may set a later retro date, and prior work could fall outside coverage. How a reinstatement treats the retro date depends on the policy, so ask about it directly.
What if you have policies with several carriers?
A New Hampshire firm told us: “I paid $1,052.71 tonight. When I signed in, it wasn’t due until Nov 7th???” The firm had policies at two carriers, each with its own portal, so a payment landed with the wrong one.
Multiple carriers mean multiple bills, due dates and logins. Keep a simple list showing each policy, the carrier, the payment schedule and where to pay. Check the carrier name on every bill before you pay.
What if a bill looks wrong?
Ask before you pay. A New York firm told us: “Our monthly nut has gone from $1923 to $3426.” It turned out to be a carrier mix-up with a same-name firm.
A jump like that is worth a call to your broker. Send the bill and ask them to confirm the amount against your policy before you pay it.
Example: a missed installment
Consider a hypothetical design firm that misses an installment and receives a cancellation notice. The firm sends the notice to its broker the same day instead of waiting.
The broker asks the carrier for the reinstatement terms, including the effective date and any gap. The firm confirms nothing happened during the gap, signs the statement and pays. It keeps the written confirmation of the reinstatement date for its records.
What to check when your policy lapses
- The date on the cancellation notice and any grace period
- The reinstatement amount, and whether it matches what you owe
- Whether reinstatement is effective with no gap
- Whether you know of any incident that the no-loss statement would cover
- How the retroactive date is treated after reinstatement
- Which carrier and portal the payment goes to
Ask an agent before you sign or pay.
Related questions
Can I reinstate a professional liability policy after cancellation?
Often yes, though terms vary. Carriers commonly ask for payment and a signed no-loss statement.
What is a no-loss statement?
It is a statement that you know of no claims or incidents during the gap. Sign it only if it is accurate.
Does a lapse affect my retroactive date?
It can. A gap may lead to a later retro date, depending on the carrier and policy.
What should I do if a bill looks higher than expected?
Ask your broker to check it against your policy before you pay.