What would you like to do?

Claims made versus occurrence policy?

already exists.

Would you like to merge this question into it?

already exists as an alternate of this question.

Would you like to make it the primary and merge this question into it?

exists and is an alternate of .

When a policy is written on a "claims-made" basis, it means that the policy in force at the time a claim against the insured is asserted applies to the claim, regardless of when the occurrence forming the basis of the claim occurred. Correlatively, the policy must be in force at the time that the claim is make for coverage to apply. The insured must also timely report it and follow all conditions precedent outlined in the policy while it is in force. There is a variant of a claims made policy, which may be set forth in an endorsement to the policy, that provides for a "retro" date. This means that the policy will apply to occurrences that took place prior to the inception of the policy (if they otherwise fall within the ambit of coverage).

With an "occurrence" based policy, even though the policy may have expired as of the time the insured received notice of the claim, the policy will afford coverage if the claim otherwise comes within the scope of coverage. This type of policy also has claims reporting provisions to which the insured must adhere, as well as a cooperation clause. The latter means that the insured must cooperate with the insurer (and the attorney it selects to defend that claim) in the defense.

Both forms of coverage have advantages and drawbacks, depending on the circumstances. It is difficult to predict whether, in any particular instance, it will be advantageous to insure using one form or the other. Only in hindsight can a judgment be made.
Advantages of "occurrence" policies
  • "Occurrence" policies are sometimes like "money in the bank," in that you can go back to old policies, years after they have lapsed and put a claim against them for incidents that happened while they were in force. Old policies should never be thrown away. They should be kept in a place of safekeeping.
  • You don't have to worry about canceling an "occurrence" policy and moving to a different insurer. Coverage remains locked in for incidents occurring while the policy was in force, as long as the insurer is in business. In contrast, once a "claims-made" policy is cancelled, it is possible that purchasing insurance for past events will become difficult, expensive or perhaps not possible.
  • Sometimes courts will find occurrences in successive policies if there is continuing harm. This can have the effect of accumulating limits over a period of years. With "claims-made," only one limit applies; that in force when the claim is actually made.

Disadvantages of "occurrence" policies
  • Insurance companies that wrote policies in previous years may no longer be in business. With "claims-made" policies, the insurer is much more likely to be around when a claim becomes payable. The length of time between an occurrence and resolution in court can be 20 or more years. An insurer in business 20 years ago may not be in business today. The only way to mitigate this risk with "occurrence" insurers is to change to a different one every few years so that you do not keep "all your eggs in one basket."
  • The limits on an "occurrence" policy are likely to be inadequate if a claim is made twenty years after a policy has expired. With "claims-made" it is easier to arrange a limit which is adequate for today's exposures.

For malpractice exposures written on an "occurrence" basis it is important to arrange limits which are somewhat more than is necessary in order to meet tomorrow's exposures. On a "claims-made" basis, one does not need to project twenty years or more into the future when setting limits; 7 years is usually the longest time it takes for a case to go through the court system, so even though you still need to project into the future, the length of time is much less.
Advantages of "claims-made" policies
  • Limits can be predicated on today's exposures more accurately than with "occurrence" policies, so there may be less of a likelihood of being underinsured.

Disadvantages of "claims-made" policies
  • Coverage is triggered by an actual claim for damages, not a notice of an "occurrence" or "incident." However, the date of the occurrence or incident must be more recent than the retroactive date of the policy. This retroactive date determines the cut-off date for claims: if the incident occurred before the retroactive date, the insurer has no obligation and the insured no coverage. While the claim has to be made during the policy period, the occurrence which gave rise to the claim has to fall after the retroactive date of the policy. A "claims-made" policy wording covers as follows:

This insurance does not apply to "bodily injury" or "property damage" which occurred before the retroactive date, if any, shown in the Declarations.
A "claims-made" policy can have:
  • No retroactive date (the broadest coverage).
  • A retroactive date that pre-dates the policy inception date (this may range from days to years). Ideally, it should go back at least to the expiration date of your last "occurrence" policy. If it goes back further it can be designed to provide top-up cover in the case of different limits.
  • A retroactive date that is the same as the policy inception date - this is the most limited coverage and excludes any claim for damages that occurred prior to the policy inception. It is acceptable only if prior to this policy "occurrence" coverage was in force or full "tail" coverage has been purchased on any previous "claims-made" policy.

Ideally, you want no retroactive date or one that includes the entire period that you have had "claims-made" coverage. Anything less makes you effectively self-insured for any claims for injuries or damage that occurred during prior claims-made policy periods which you have not reported to your insurer at the time of the occurrence (unless such claims are covered by supplemental "tail" coverage).
  • The first claim for damages determines which policy applies. For example, if a person first makes a claim for medical payments in 1986, then files for additional damages in 1988, both claims activate the 1986 claims-made policy.
  • With "claims-made" basis of coverage, should the policy ever be allowed to lapse or be cancelled, the insured is generally given the option of purchasing coverage, for a stated period following the expiration of the policy (extended reporting period). Any "claims-made" during this extended reporting period month period would then be covered if it otherwise comes within the scope of coverage. With "occurrence" policies you can be less concerned with coverage lapses or insurer changes.
  • If coverage terms ever become more restrictive on subsequent renewal of a "claims-made" policy, the new terms apply retroactively to the original retroactive or inception date.
+ 37 others found this useful
Thanks for the feedback!

Can someone tell you what exactly is a Manifestation occurrence Form Liability coverage And how it is different pro or con to a claims made policy?

Answer   * The occurrence policy is designed to cover occurrences that take place during the policy period.  * The claims made policy is designed to cover claims that

How can insurance claims be made to Allstate?

The first things to do would be to contact your Allstate agent. You can also call the claims center or go online to the customer care center and use the Claims Self-Service to

Could an ex wife contest her ex husband's life insurance benefits claiming he was to hold a policy for her and then made his current wife the policy beneficiary?

    Answer       She could contest it, but it would be a futile effort, as any person has the right to change beneficiaries even if they are happily marr

What is the difference between occurrence based insurance and claims based insurance?

  There are two basic policy forms offered by malpractice insurers, claims made and occurrence.   Occurrence coverage is the most desirable form of coverage, but it is

Claims made policy?

"Claims Made Policy" - The Insured is indemnified in case a claim arises during the policy period, no matter when a claim may arise, the Policy pays the insured for the Claim,

Why is tail coverage in a claims made policy important?

  Answer     Claims made policies must have an occurrence occur and be reported to the carrier within the policy period. The tail protects against claims made s

What is the difference between a claims made and occurrence general liability policy?

Occurrence policy key date is the date of the Occurrence or accident. If that date is during the effective policy period, that policy applies. On claims made policies, the tri

Have versus has?

  * has is the third person singular present - he/she/it has.  * have is used with the first and second persons singluar and all persons in the plural - I/we/you/they hav

How did eisenhower claim to differ on foreign policy compared with Truman?

Eisenhower was more aggressive than Truman in his foreign doctrine yet they both had the same ideals and value. Truman did act on communist aggression with the Korean War. The

I was the beneficiery to my moms life insurance policy do i have to claim it on my taxes?

as far as im aware yes you do! a grandmother of a friend of mine sadly passed away a few years back, and left her house to my friends father. I believe he had to pay somewhere