8.3 Occurrence vs. Claims-Made Triggers

The Coverage Trigger Problem

A coverage trigger answers one question: which policy responds to a loss? For property, the trigger is obvious — the fire happens on a date. For liability, harm can stay hidden for years (a slow chemical exposure, latent product defect, or professional error discovered long after the work). ISO solves this with two distinct Commercial General Liability triggers: the occurrence form and the claims-made form, both editions of CG 00 01 and CG 00 02 respectively.

Occurrence Trigger

An occurrence policy (ISO CG 00 01) responds if the bodily injury or property damage happens during the policy period, regardless of when the claim is filed. A claim reported in 2030 for an injury that occurred in 2024 is paid by the 2024 policy.

This creates two practical features:

• Long tail — the insurer's exposure continues for years after the policy expires, because late claims trace back to the policy in force when injury occurred.
• Stacking of limits — a claimant may reach back to an old policy's limits; multiple policy years can apply to a long, continuous injury.

Claims-Made Trigger

A claims-made policy (ISO CG 00 02) responds only if both 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. Two dates control everything:

• Retroactive date — the earliest injury date the policy will cover. Injury before this date is excluded, no matter when reported. Advancing or erasing the retro date creates a dangerous gap.
• Extended Reporting Period (ERP) / "tail" — coverage for claims reported after the policy ends for injuries that occurred during the policy term. ISO provides a Basic ERP (automatic: 60 days for any claim, 5 years for claims arising from injuries reported within 60 days) and an optional Supplemental ERP (purchased, often unlimited duration, up to 200% of the annual premium).

Comparing the Triggers

Exam trap: A claims-made policy with no retroactive date (or a retro date set at policy inception) provides no prior-acts coverage. When an insured switches carriers, buying prior-acts (nose) coverage or a tail (ERP) from the expiring carrier prevents a gap. The first year of a claims-made program (when the retro date equals the inception date) is the cheapest — premiums rise as the gap between retro date and the present widens, a feature called step-rating, reaching maturity around year five.

Nose vs. Tail — Avoiding the Gap

When an insured moves from one claims-made carrier to another, two purchases protect against a coverage gap:

• Tail coverage (ERP) — bought from the expiring insurer; covers claims reported after that policy ends for injuries during its term. Use this when the insured is retiring or moving to occurrence coverage.
• Nose coverage (prior-acts) — bought from the new carrier; the new claims-made policy sets its retroactive date back to the old policy's retro date, so the new insurer picks up old, not-yet-reported injuries. Use this when continuing with a new claims-made carrier.

Never buy both for the same period — that would double-cover and waste premium. The exam loves a scenario where the wrong choice (e.g., buying a tail while also moving to a new claims-made policy with full prior acts) creates redundant cost.

Worked Claims-Made Timeline

Assume: retroactive date 1/1/2022, policy period 1/1/2024–1/1/2025, and a 60-day basic ERP.

Match the injury date against the retro date first, then the claim date against the policy period plus any ERP. Both tests must pass.

Why Insurers Use Each Form

The choice of trigger is a pricing and reserving decision:

• Occurrence pricing is harder because the insurer must reserve for unknown future claims tied to today's policy — claims that may surface a decade later (asbestos and environmental losses are the cautionary tales). The premium must anticipate inflation in future verdicts.
• Claims-made pricing is more predictable because the insurer knows that only claims reported now will hit the current policy. This is why professional liability, medical malpractice, and directors-and-officers (D&O) coverage — lines with long, uncertain reporting patterns — are written almost entirely on claims-made forms.

For the producer, the practical risk lies in transitions: a client leaving a claims-made program without buying a tail, or accepting a new claims-made policy that resets the retroactive date forward, can be left with an uninsured window for work already performed. Documenting the retro date on every renewal is a core errors-and-omissions safeguard.