8.3 Occurrence vs. Claims-Made Triggers

Two Ways a Liability Policy Can Be Triggered

The coverage trigger is the event that activates the policy. The ISO Commercial General Liability (CGL) program offers two trigger forms.

• Occurrence form (CG 00 01) — responds to bodily injury or property damage that takes place during the policy period, regardless of when the claim is reported.
• Claims-made form (CG 00 02) — responds only when a claim is first made against the insured during the policy period, subject to a retroactive date.

Most small commercial accounts use occurrence coverage; professional liability and some products lines use claims-made.

How the Occurrence Trigger Works

Under an occurrence form, the policy in force when the injury or damage happens pays — even if the claim arrives years later. This is ideal for long-tail exposures.

Example: A roofer installs a roof under a 2024 occurrence policy. The roof leaks and damages the building in 2027. Because the property damage occurred while the 2024 policy was in force, that 2024 policy responds — even though the policy expired and the claim came three years later.

Exam trap: With occurrence coverage, you look at the date of injury, not the date of the claim.

How the Claims-Made Trigger Works

A claims-made form requires two things to align:

1. The injury must occur on or after the retroactive date.
2. The claim must be first reported during the policy period (or an extended reporting period).

Retroactive Date

The retroactive (retro) date is the earliest injury date the policy will cover. Any injury before the retro date is excluded, even if reported during the policy period.

Example: A policy has a retro date of January 1, 2025. An error made in 2024 produces a claim in 2026. The claim is denied because the wrongful act predates the retro date.

Extended Reporting Periods (Tail Coverage)

When a claims-made policy is canceled or non-renewed, claims reported afterward could fall into a gap. Extended Reporting Periods (ERPs), or tail coverage, solve this.

Tail coverage lets a retiring professional or a business that switches to occurrence coverage report a covered claim after the claims-made policy ends, as long as the injury post-dates the retro date.

Why Long-Tail Exposures Drive Trigger Choice

Some injuries surface long after the negligent act. Construction defects, products liability, and toxic torts (asbestos, environmental contamination) can take years or decades to manifest.

• Occurrence coverage is favorable to the insured for these exposures because the policy in force when the harm began responds, even after the policy expires.
• Claims-made coverage gives the insurer better control of its long-term liability, which is why medical malpractice, directors and officers, and errors and omissions lines commonly use it.

Exam trap: A single long-tail injury can implicate several occurrence policy years, raising complex allocation questions the standard exam simplifies to "the year the injury occurred."

Claims-Made Step-Up and Pricing

A mature claims-made program prices in steps as the gap between the retro date and the present widens.

Because each renewal covers a larger window of prior wrongful acts, premiums rise (step up) for the first several years and then level off when the program is mature. Switching carriers usually requires either matching the retro date or buying tail coverage.

Reporting Mechanics and Notice

Under a claims-made form, the insured must report a claim during the policy period to trigger coverage. Many forms also allow reporting of circumstances that may give rise to a claim, locking in that policy year even if the formal demand arrives later.

• A claim is typically a written demand for damages or the service of suit.
• Late reporting can void coverage even when the act was clearly covered, so notice discipline matters.

Example: An accountant aware in December of a likely malpractice claim reports the circumstance before renewal; when suit is filed the next year, the prior year's policy responds because the circumstance was timely noticed.

Choosing Tail vs. Nose Coverage

When an insured moves between carriers, prior-acts protection can be arranged two ways.

Either approach closes the gap; buying nose coverage by carrying the old retro date forward is often cheaper than purchasing a supplemental tail. An insured should never let a claims-made program lapse without one of these in place, or a covered act could go unprotected.

Exam trap: Tail is purchased from the old carrier; nose (prior acts) is purchased from the new carrier.