There are two primary types of insurance policy forms: occurrence and claims-made. The difference between an occurrence and claims-made liability policy is all about timing—that is, the coverage “trigger.” The question is not only what event must take place to obligate the policy to respond but also when that event must take place.
What is an Occurrence policy?
A policy covering claims that arise out of damage or injury that took place during the policy period, regardless of when claims are made. The policy then covers those incidents forever. Most commercial general liability (CGL) insurance is written on an occurrence form.
What is a “claims-made” policy?
A policy providing coverage that is triggered when a claim is made against the insured during the policy period, regardless of when the wrongful act that gave rise to the claim took place. (The one exception is when a retroactive date is applicable to a claims-made policy. In such instances, the wrongful act that gave rise to the claim must have taken place on or after the retroactive date.) Most professional, errors and omissions (E&O), directors and officers (D&O), and employment practices liability insurance (EPLI) is written as claims-made policies.
What is a Retroactive date?
One of the most important characteristics of a claims-made policy is the retroactive date. Your retroactive date is the start date of the first claims-made policy you are actively renewing. You are covered for any covered incident as long as it occurs on or after your retroactive date (also known as prior acts date). That date remains the same and is not advanced as long as you renew your policy.