Occurrence vs. Claims-Made CGL and Retroactive Dates

Two Coverage Triggers, Two ISO Forms

ISO issues the CGL in two trigger versions: the occurrence form (CG 00 01) and the claims-made-and-reported form (CG 00 02). The trigger determines which policy responds to a loss, and it is one of the most heavily tested distinctions on the national P&C exam.

• Occurrence trigger: coverage applies when the bodily injury or property damage occurs during the policy period, regardless of when the claim is later filed. The policy in force when the harm happened responds, even if the claim arrives years later.
• Claims-made trigger: coverage applies when the claim is first made against the insured during the policy period (and reported to the insurer), provided the injury occurred on or after the retroactive date.

Why Claims-Made Exists

For long-tail exposures - latent disease, construction defects, product liability that surfaces years after sale - an occurrence form can leave an insurer paying claims decades after the premium was earned. Claims-made forms let insurers price and reserve more accurately because the year a claim is reported, not the year the injury occurred, controls coverage.

The price of that certainty is shifted to the insured, who must manage gaps when switching carriers or retiring. Two devices control those gaps: the retroactive date and the extended reporting period (tail).

A core exam idea is that occurrence coverage "stacks": each policy year stays on the risk for its own injuries indefinitely, so a claimant can reach back to the policy in force when the harm occurred. Claims-made coverage does not stack - a single in-force policy (or a tail) answers for any given claim, which is why an unbroken chain of retroactive dates matters so much when an insured changes carriers.

The Retroactive Date

The retroactive date is the date in a claims-made policy before which injury or damage is not covered. To trigger coverage, two things must both be true: the injury occurred on or after the retroactive date, and the claim is first made during the policy period (or any applicable extended reporting period).

• Setting the retroactive date equal to the first day the insured ever bought claims-made coverage preserves the broadest protection ("full prior acts").
• Advancing the retroactive date - moving it forward in time - is a coverage reduction; it eliminates coverage for older injuries and may be done at renewal only with notice.
• A policy with no retroactive date covers prior acts of any age (subject to the claim being first made in the period).

Tail and Nose Coverage

When a claims-made policy is canceled or non-renewed, claims for past injuries that arrive later would otherwise fall through a gap. Two solutions:

ISO provides a Basic Extended Reporting Period automatically (a short 60-day window to report, plus a 5-year mini-tail for occurrences known but not yet claimed) and an optional Supplemental Extended Reporting Period that the insured buys, often providing unlimited time to report.

Step-Factor Pricing and the Maturing Claims-Made Policy

Claims-made premiums start low and rise each year as the policy "matures" toward occurrence-equivalent pricing - typically over about five years. A first-year (immature) claims-made policy is the cheapest because it covers only claims for injuries on or after the retroactive date that are reported in that single year. A mature (5th-year) policy costs the most and prices closest to an occurrence form.

Worked example: if an occurrence premium would be $10,000, a first-year claims-made policy might apply a step factor of roughly 0.40 ($4,000), a third-year factor near 0.80 ($8,000), and a fifth-year mature factor of about 1.00 ($10,000). The exam tests the direction of the trend, not exact factors.

Reading a Trigger Fact Pattern

The fastest way to answer a trigger question is to ask what event the stem dates. If it dates the injury or damage, an occurrence policy responds - the policy in force when the harm happened pays, even years later, and occurrence coverage stacks across years. If it dates the claim, a claims-made policy responds only when the claim is first made (and reported) during the period and the injury occurred on or after the retroactive date. Anchoring on which event the facts date prevents the common error of applying the wrong form.

Maintaining the Retroactive-Date Chain

When an insured switches carriers, the retroactive date must carry forward or the insured needs nose (prior-acts) coverage on the new policy or a tail (extended reporting period) on the old one. Advancing the retroactive date is a silent coverage reduction that strips older injuries. ISO supplies a short basic tail automatically and an optional supplemental tail the insured buys, often with unlimited reporting time. Expect a scenario where an insured retires or changes insurers and a late claim surfaces - the correct answer is almost always the extended reporting period or matching prior-acts coverage.