Liability Insurance 101: Claims-made Vs. Occurance Coverage

In response to frequent questions regarding the difference between claims-made insurance and occurrence coverage (the type provided through the Association), CSWA Executive Director Richard Yates has provided the following explanation:

A claims-made policy covers claims that happened and are reported during a covered period of time. With a claims-made policy you must have the policy in effect during the time period when the event occurred and at the time the claim is made, even if the two are separated by many years.

An occurrence policy covers those claims that arise from an event during the time the policy was in-force, regardless of how long a period separates the event from the claim.

Is there an advantage of having an occurrence policy versus a claims-made policy?

The advantage lies in the fact that claims are rarely made in the same year in which the service was provided; in fact many years can go by before the claim is filed. So long as the occurrence policy was in-force during the time the practitioner provided the service, the practitioner is covered. This means that years after a practitioner has stopped carrying this kind of insurance they are still covered for events that took place when they had the insurance, no matter when the claim is filed.

What happens to my coverage when I switch from a claims-made policy to an occurrence policy?
Any claims that arise out of events during the time of the claims-made policy will not be covered by the occurrence policy. Most practitioners will want to consider purchasing what is called Extended Reporting Period (ERP), more frequently (and mistakenly) called “tail coverage”. ERP, like an insurance policy, covers the practitioner into the future for that time period when the claims-made policy was in-force but is no longer. Remember, when a claims-made policy ends so does the coverage, so a claim made later arising from an event during the time a claims-made policy was in-force is not covered.

Practitioners have the option of purchasing ERP from 1 year to an unlimited time period into the future at different rates.

How long a period should my ERP cover?

Each practitioner’s situation is different so it is impossible to provide a single answer for all. Generally, claims are reported:

Other factors the practitioner may want to consider as they assess their risk are:

Also, additional factors may have an impact depending on the practitioner’s particular circumstances.

For additional information, a free quote, or answers to questions contact CPH and Associates at 800-875-1911 or visit their web site at www.cphins.com. ▪