11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates

Two Coverage Triggers

ISO publishes the CGL on two trigger forms: the occurrence form (CG 00 01) and the claims-made form (CG 00 02). The trigger answers one question: which policy responds to a given loss? This is among the most tested distinctions in the casualty portion.

The Occurrence Trigger

An occurrence policy covers bodily injury or property damage that takes place during the policy period, no matter when the claim is reported. If injury occurs in 2026 but the lawsuit arrives in 2031, the 2026 occurrence policy responds. This creates long-tail exposure: insurers may pay claims years after collecting the premium, which is why occurrence coverage costs more.

Quick Answer: Occurrence = covered if the injury HAPPENED during the term. Claims-made = covered if the claim was REPORTED during the term (after the retro date).

The Claims-Made Trigger and Retroactive Date

A claims-made policy responds only when a claim is first made against the insured during the policy period AND the injury occurred on or after the retroactive date. The retroactive date is the line in the sand: any injury before it is permanently excluded, even if the claim is reported during the active period.

• Retro date = first day the insurer is willing to cover prior acts
• Injury before retro date → never covered
• Claim reported after policy ends → covered only via an ERP

Worked example: A medical-device firm buys a claims-made CGL effective 1/1/2024 with a retro date of 1/1/2022.

• Injury occurred 6/1/2023, claim filed 3/1/2024 → Covered (injury after retro date, claim made during period).
• Injury occurred 6/1/2021, claim filed 3/1/2024 → NOT covered (injury predates the 1/1/2022 retro date).

Extended Reporting Periods (Tails)

Because a claims-made policy will not pay a claim reported after it expires, ISO provides Extended Reporting Periods (ERPs) so claims arising before expiration but reported afterward can still be covered:

• Basic ERP ("mini-tail") — automatic, no extra premium. Gives a 60-day window to report claims AND a 5-year window for claims from occurrences already reported as incidents during the policy.
• Supplemental ERP ("tail") — purchased by endorsement, premium up to 200% of the last annual premium, provides an unlimited reporting period. Must usually be requested within 60 days of expiration.

A Supplemental ERP can be triggered when the insurer cancels or nonrenews, refuses to renew on the same terms, advances the retro date, or switches the insured to occurrence coverage. The insured generally has a short window (often 60 days after expiration) to elect and pay for the tail; missing that window can leave prior acts uncovered.

The Maturing of Claims-Made Pricing

A brand-new ("first-year") claims-made policy is cheap because the only injuries that can produce a covered claim are those occurring in that single year. As the retro date stays fixed year after year, the policy "matures": more prior years become exposed, and premiums rise until the policy is mature (typically year 5), when its price approaches occurrence-form levels. This is why claims-made starts cheaper but is not free over the long run — students who answer "claims-made is always cheaper" miss the maturing concept.

The Danger of Advancing the Retro Date

If a producer advances (moves later) or removes the retroactive date at renewal, every claim arising from acts before the new date loses coverage. A gap also appears when an insured switches carriers and the new claims-made policy uses a later retro date than the prior one. Trap: the exam frames this as a producer E&O hazard — the correct answer is usually to keep the original retro date or buy a tail. Going from claims-made to occurrence likewise requires a tail on the old policy to cover the gap.

Choosing Between the Forms

For short-tail risks where injury and claim happen close together, either form works and occurrence is simplest. For long-tail professional or products exposures, claims-made lets insurers reserve more accurately and price competitively, but it shifts the burden of maintaining continuous coverage and the retro date onto the insured. The producer's job is to prevent gaps — by keeping the retro date, arranging prior-acts ("nose") coverage when a new carrier writes the risk, or buying a tail when coverage ends.

Nose Coverage vs. Tail Coverage

These two prior/late mechanisms are mirror images and the exam pairs them deliberately:

When an insured moves from Carrier A to Carrier B, there are two clean ways to avoid a gap: Carrier B grants full nose coverage (matching the original retro date), OR the insured buys a tail from Carrier A. Buying both is wasteful; buying neither creates an uninsured gap. Trap: the exam asks which single step closes the gap when switching carriers — either nose from the new insurer or a tail from the old insurer suffices.

Reporting an Incident vs. a Claim

Claims-made forms distinguish a claim (a demand for damages) from an incident (a circumstance that may give rise to a claim). Most claims-made CGLs let an insured report a known incident during the policy period; if that incident later matures into an actual claim — even years later — it is treated as having been made during the policy period that received the incident notice. This is why prompt incident reporting protects coverage, and why the Basic ERP extends five years specifically for already-reported incidents. Failing to report a known incident before the policy lapses is a common way coverage is lost.

Worked Comparison

Same facts, two forms. Injury occurs 8/1/2025; claim is filed 10/1/2027.

• Occurrence policy in force during 2025: responds — injury happened in its term, reporting date irrelevant.
• Claims-made policy expiring 12/31/2025 with no tail: does NOT respond — the claim was made in 2027, after expiration. A Supplemental ERP would have covered it.

This single comparison captures the whole trigger distinction the exam tests.