The Difference Between Occurrence and Claims-Made Policies

May 23, 2023

Discover the differences between occurrence and claims-made policies, how to identify which one you have, and what kind of coverage they provide.

The Difference Between Occurrence and Claims-Made Policies

When should you report a claim or incident? Will your policy cover or defend the claim? Does it matter what type of policy I have?

The key question above is the last one – It all depends on the type of commercial insurance policy you have. Otherwise, the first two questions cannot be answered adequately.

Commercial property and casualty policies are placed into two categories:

  • Occurrence
  • Claims-made

The type of coverage you have determines if your policy will respond and what responsibilities you will have in the event of a claim or potential claim.

Occurrence policies

Occurrence policies are typically the most common type of commercial insurance policies. They cover bodily injury or property damage that happens (subject to the terms and conditions of the policy contract) within your policy term, regardless of the date you submit the claim.

Claims for bodily injury or property damage should be reported to the carrier as soon as possible. However, in some cases, you may not be made aware of the claim until significant time has elapsed from the date of loss. With an occurrence policy, you can report a claim to a prior policy term even if that term has ended.

Be aware that insurance carriers sometimes define “occurrence” differently as it relates to when a bodily injury materialized. This is often the case with bodily claims from long-term exposure to toxins (e.g. asbestos, crystalline silica, etc.). When it comes to determining the occurrence of a long-term exposure bodily injury claim, it will need to be determined if the injury occurred at the time of exposure to the toxin or when the effects of the exposure manifested.

Claims-made policy

Claims-made policies provide coverage (subject to terms and conditions of the policy contract) that is triggered when a claim is made against your company, regardless of when the incident took place.

These policies can be more complex than occurrence policies due to components such as incident only notices, “tail coverage”, and “retroactive dates”. Claims-made policies often require the insured to report a claim when there may not even be a claim (yet).

Incident only notification / Notice of circumstance

In other words, you can report an incident that caused, or may potentially cause someone to make a claim at a later date. By reporting the “incident,” you will protect your rights under the policy in the event a claim is made, especially after the policy term expires. You likely will not have coverage if you are made aware of an incident that could eventually become a claim but do not report a claim or incident during the current policy term.

Tail coverage

An extended reporting period (ERP), or “tail coverage”, can be purchased for an additional premium. This supplementary coverage allows claims to be reported during the ERP which is after the expiration of the policy.

Retroactive date

Lastly, it is important to be aware if your claims-made policy has a “retroactive date” (predetermined date prior to the policy term inception date). When a retroactive date is applicable to a claims-made policy, the wrongful act that gave rise to the claim must have taken place on or after the retroactive date.

Ultimately, you want to make sure you are obtaining the type of policy that best compliments your company’s unique situation and provides the most protection possible when you file a claim.

The Miller Group is ready to assist in helping you decide which is the best for your company. Or feel free to contact us to get a better understanding of the policy you have in place.

About The Author

Dustin Carney, AIC-M, SCLA

Dustin Carney, AIC-M, SCLA
Email As Director of Claims, Property & Casualty, Dustin has more than 20 years of experience in claims. Dustin serves as an advocate throughout the claims process for our clients and works to maintain and improve claim processes. He specializes in claims litigation management, general liability claims advocacy and is a subject matter expert in large and complex property claims.

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