11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates
Key Takeaways
- An occurrence form covers injury or damage that happens during the policy period regardless of when the claim is reported.
- A claims-made form covers claims first made during the policy period for injury that occurred on or after the Retroactive Date.
- The Retroactive Date defines the earliest loss date a claims-made policy will cover; losses before it are never covered.
- Extended Reporting Periods (tail coverage) let claims-made insureds report late claims after the policy ends.
- Switching forms or carriers can create coverage gaps if Retroactive Dates and tails are not managed carefully.
Two Coverage Triggers
The ISO CGL is sold on two trigger types. The occurrence form (CG 00 01) responds when bodily injury or property damage happens during the policy period — even if the claim is filed years later. The claims-made form (CG 00 02) responds when a claim is first made during the policy period (or its reporting extension).
The trigger is simply the event that activates coverage. Choosing the wrong trigger on an exam question usually means missing how a long-latency injury is handled.
Occurrence Form Mechanics
Under the occurrence form, the only date that matters is when the injury or damage took place. If a product injures a consumer in the policy year, that policy responds even if the lawsuit arrives a decade later.
This makes occurrence coverage attractive for long-tail exposures, but it forces insurers to hold reserves for years. Once a policy period closes, the limits for that year are essentially locked; later inflation or social-inflation verdicts can erode those older limits.
Key point for exams: a late-reported claim on an occurrence policy goes back to the policy in force when the injury occurred, not the current one.
Claims-Made and the Retroactive Date
The claims-made form covers a claim only if two conditions are met: the claim is first made during the policy period (or an extended reporting period), and the injury occurred on or after the Retroactive Date (Retro Date).
The Retro Date is the earliest loss date the policy will cover. Anything that happened before the Retro Date is excluded forever, even if reported during the current term.
| Form | Trigger | Limited by Retro Date? |
|---|---|---|
| Occurrence | Date injury occurs | No |
| Claims-Made | Date claim is made | Yes |
Extended Reporting Periods (Tails)
Because a claims-made policy stops responding once it expires, insureds buy an Extended Reporting Period (ERP), also called tail coverage, to report claims after the policy ends.
There are two kinds. A Basic (mini) tail is automatic and short — typically 60 days for late reports plus a longer window for occurrences reported near expiration. A Supplemental (full) tail is purchased, can be much longer or unlimited, and must be elected within a set period after the policy ends.
The tail does not move the Retro Date; it only extends the time to report, so pre-Retro losses stay excluded.
When a Tail Is Triggered
A Supplemental tail typically becomes available when the policy is cancelled or nonrenewed, or when the insurer advances the Retro Date or switches the insured to occurrence coverage. The insured usually has a short window — often 60 days — to elect and pay for the tail.
The tail is single-shot: it uses the expiring policy's limits, which are not reinstated. If those limits were already eroded by prior claims, the tail offers only what remains.
Exam trap: a tail does not provide fresh limits and does not extend the occurrence window — it only extends the reporting window for injuries that already fall after the Retro Date.
Scenario: Watching the Gap
A business holds a claims-made CGL with a Retro Date of 1/1/2023. An employee's faulty installation in 2022 causes property damage discovered and claimed in 2026.
Even though the claim is made during a current policy with an ERP, the injury predates the Retro Date, so coverage does not apply. The business should have negotiated a Retro Date no later than the start of its operations or kept a prior occurrence policy.
When moving from occurrence to claims-made coverage, set the Retro Date to the date occurrence coverage ended to avoid a gap.
Pricing and Maturity
Claims-made policies are usually cheaper in the first year because the carrier is on the hook for a short window of reported claims. As the policy matures — year two, three, and beyond — the Retro Date stays fixed while the reporting window lengthens, so the exposure and premium climb each year until the policy reaches a mature rate.
This maturity slope is why an insured who chases a low first-year claims-made premium may face steep increases at renewal. By contrast, occurrence pricing reflects the full long-tail exposure from day one, so its premium is more level over time.
Switching Carriers Without a Gap
When an insured changes claims-made carriers, two clean options preserve coverage. The new insurer can grant prior acts (nose) coverage by adopting the same Retro Date as the expiring policy, so old occurrences still have a home. Alternatively, the insured can buy a Supplemental Extended Reporting Period (tail) from the departing carrier to report claims for prior injuries.
Buying both nose and tail is wasteful and creates double coverage; buying neither creates a gap. Exam questions reward picking the single correct mechanism for the fact pattern.
| Action | Who provides it | What it protects |
|---|---|---|
| Tail / ERP | Old carrier | Late-reported prior-injury claims |
| Nose / prior acts | New carrier | Same prior injuries via shared Retro Date |
Why Insurers Use Claims-Made Forms
Claims-made coverage exists to solve the long-tail problem: in lines like products liability, professional liability, and pollution, an injury may not surface for years or decades after the act. An occurrence form forces the insurer to keep reserves open indefinitely for unknown future claims tied to old policy years. A claims-made form instead caps the insurer's exposure to claims reported during the period (plus any tail), making reserves more predictable and premiums more stable. The trade-off for the insured is the need to manage the retroactive date and reporting tail carefully when switching carriers.
The Five Claims-Made Maturity Steps
Claims-made premiums rise over the first several years as the exposure matures. A first-year claims-made policy is cheapest because, with a retroactive date equal to inception, only that year's acts can generate claims. By year five (mature), four prior years of acts are also exposed, so the premium approaches occurrence-form levels. This step-rating is why moving the retroactive date forward (which the insurer should not do without the insured's awareness) silently strips coverage for earlier acts - a serious E&O concern.
When replacing a claims-made policy, the insured chooses between buying tail (ERP) from the departing insurer or prior-acts (nose) coverage from the new one, but never needs both.
Exam Tip: Occurrence = injury-during-period trigger (whenever reported); claims-made = claim-reported-during-period trigger, governed by a retroactive date and ERP/tail; never let the retro date advance, and buy either nose or tail - not both - when switching.
A claims-made CGL has a Retroactive Date of January 1, 2024. A bodily injury occurs in June 2023 but the claim is first made in March 2026 during the active policy. Is the claim covered?
Which statement correctly distinguishes the two CGL triggers?