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What is the difference between claims made and occurrence coverage?

How the timing of a claim can affect coverage.

The vast majority of business liability policies that we see are written on an "occurrence" basis. However, some of the specialty policies we write, such as Professional Liability (Errors & Omissions), Employment Practices Liability, Directors & Officers, etc. are typically written on a "claims made" form.

This is an important distinction that really has to do with the timing of a claim and how that can affect coverage.


Simply put, under an occurrence form of insurance, a claim simply needs to have occurred while the policy was in force to be paid. So, even if the policy cancels, you have coverage as long as the incident occurred while you had coverage.

Claims made

A claims made policy requires that both the incident occurrence and the claim notification take place during the policy period. This makes keeping continuous coverage in force VERY important. For instance, if you have an E&O policy and you were to retire or change professions, it is advisable to buy an extended reporting period, commonly known as tail coverage, to extend the amount of time that you have to report a claim beyond the cancellation date in case there is an issue bubbling up that you are unaware of.

Claims Made Example: A Real Estate Agent's client claims that they breached their duty as an agent by not making them aware of a water rights dispute with the neighbor of the property they purchased. They sold them the property 2 years ago and they are just now making the claim.

Under a claims made policy, the Real Estate Agent would have coverage as long as their policy was in force at the time of the sale AND remained in force until the time the claim was made against them.

If, however, they failed to maintain continuous coverage during the 2 years between the date of sale and the date of claim, they may have a problem. Say the policy that they owned at the time of sale lapsed and they had to write a new policy for whatever reason. The new policy may not respond as it was not in force at the time of the claim. They may be able to pick up this type of coverage buy endorsing the claims made policy to add coverage for prior acts. It is important to know if a policy has this prior acts coverage.