predecessor firm coverage

Predecessor firm coverage refers to a provision found in professional liability policies written mainly for lawyers or accountants that affords coverage for the acts of the firm that preceded the current insured organization.

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For example, assume that two accountants, "A" and "B," form a partnership. After 5 years, they merge their practice with an existing partnership consisting of accountants "C," "D," and "E." The predecessor firm provision in the professional liability policy purchased by this new combination would provide coverage for errors and omissions committed during the AB partnership even if claims arising from those errors or omissions are not made until after the merger of the two firms.