Occurrence vs Claim
The two primary coverage trigger types: occurrence policies cover events during the policy period; claims-made policies cover claims reported during it.
What It Is
Occurrence and claims-made are the two fundamental coverage trigger mechanisms in liability insurance. An occurrence policy covers bodily injury or property damage that occurs during the policy period, regardless of when the claim is made. A claims-made policy covers claims that are first made against the insured and reported to the carrier during the policy period, regardless of when the underlying event occurred (subject to any retroactive date).
Occurrence policies are standard for CGL, commercial auto, and workers compensation. Claims-made policies are standard for professional liability, D&O, EPLI, and cyber liability. The choice of trigger has profound implications for long-tail claims, coverage gaps, and policy transitions.
Claims-made policies introduce additional complexity through retroactive dates and extended reporting periods (tails). The retroactive date establishes the earliest date from which covered claims can arise. An extended reporting period allows the insured to report claims after the policy expires for events that occurred during the policy period. Tail coverage can be purchased for one to six years, or in some cases, indefinitely. Tail premiums typically range from 100% to 200% of the annual premium for a multi-year tail.
Why It Matters for Brokers
Understanding coverage triggers is essential for avoiding gaps during carrier changes. Switching from one claims-made carrier to another requires careful coordination of retroactive dates. Switching from claims-made to occurrence (or vice versa) creates the risk of a gap for claims arising from past events. Brokers must manage these transitions meticulously to maintain continuous coverage.
Real-World Example
An accounting firm switches professional liability carriers at renewal. The expiring policy is claims-made with a retroactive date of January 1, 2019. The new carrier offers a policy with a retroactive date of the new inception date, January 1, 2026, creating a seven-year gap. Any claim arising from work performed between 2019-2025 that is reported after January 1, 2026, would be uncovered. The broker negotiates a full prior-acts retroactive date matching the original 2019 date, eliminating the gap. If unsuccessful, the broker would need to purchase a tail on the expiring policy at approximately $28,000 (150% of the $18,500 annual premium).
Common Mistakes
- 1Changing claims-made carriers without matching the retroactive date, creating a gap in coverage for prior acts.
- 2Not purchasing tail coverage when a claims-made policy is cancelled or non-renewed, leaving the insured exposed for events that occurred during the policy period but are reported afterward.
How brokerageaudit.com Handles This
brokerageaudit.com's Policy Checker identifies the coverage trigger type for every liability policy and tracks retroactive dates on all claims-made policies. During renewal, the system validates that new policies maintain retroactive date continuity and alerts brokers when a carrier change could create a prior-acts coverage gap.