A provision found in many (although not all) claims-made policies that
eliminates coverage for claims produced by wrongful acts that took place prior
to a specified date, even if the claim is first made during the policy period.
For example, a January 1, 2010, retroactive date in a policy written with a
January 1, 2010-2011, term, would bar coverage for claims resulting from
wrongful acts that took place prior to January 1, 2010, even if claims
(resulting from such acts) are made against the insured during the January 1,
2010-2011, policy period.
There are two purposes of retroactive dates: (1) to eliminate coverage for
situations or incidents known to insureds that have the potential to give rise
to claims in the future and (2) to preclude coverage for "stale"
claims that arise from events far in the past, even if such events are unknown
to the insured. In the former case, the retroactive date preserves the
principle of "fortuity"—that is, the insurer should not be called
upon to cover the so-called burning building. In the latter instance, the
retroactive date makes policies more affordable by precluding coverage for
events that, while insurable, are remote in time.