8.3 Occurrence vs. Claims-Made Triggers

What a Coverage Trigger Does

A coverage trigger is the event that determines which policy responds to a loss. In liability insurance there are two trigger systems, and distinguishing them is one of the most heavily tested concepts on the casualty exam. The standard forms are the ISO Commercial General Liability (CGL) Coverage Form — issued in both an occurrence version (CG 00 01) and a claims-made version (CG 00 02).

Occurrence Trigger

An occurrence policy covers bodily injury or property damage that takes place during the policy period, no matter when the claim is later reported — even years after the policy expires. This is ideal for long-tail exposures where harm may not surface immediately. The trade-off for insurers is the difficulty of reserving for claims that may arrive a decade later, which is why occurrence pricing tends to be higher and why some lines moved to claims-made.

Claims-Made Trigger

A claims-made policy covers a claim only if it is first made during the policy period (or any extended reporting period) and the injury occurred on or after the retroactive date. Two control dates are essential:

• Retroactive date: No coverage for injury that occurred before this date. A policy with a retro date equal to its inception covers nothing that happened earlier.
• Extended Reporting Period (ERP), or "tail": Extends the time to report claims after the policy ends, protecting against late-reported claims when coverage is not renewed.

Basic vs. Supplemental ERP (CGL)

The ISO claims-made CGL provides a Basic Tail automatically: a 60-day window to report claims for occurrences already reported, plus a five-year window for incidents reported during the policy term. A Supplemental Tail (purchased by endorsement) provides an unlimited reporting period for covered prior occurrences. Candidates should know the 60-day/5-year basic structure and that the supplemental tail is unlimited in time.

Why It Matters: Switching and Gaps

The danger in claims-made coverage is the gap on switching. If an insured moves from one carrier to another and the new policy's retroactive date is set to the new inception, claims for older injuries — reported late — fall through the crack. The fixes are to either purchase a tail on the expiring policy or set the new policy's retro date back to the original coverage date ("nose" coverage).

Worked trap: Injury occurs in Year 1; the claim is first made in Year 4. An occurrence policy in force in Year 1 responds. A claims-made policy responds only if it is in force in Year 4 and its retroactive date is on or before Year 1.

Maturity and Pricing

Claims-made policies move through steps in their first years (first-year, second-year, mature), with premiums rising toward the "mature" rate as the exposure to reported claims grows. A first-year claims-made policy is cheaper than an equivalent occurrence policy precisely because it covers a smaller window of reportable claims. By the mature year, pricing converges. Expect the exam to ask which trigger a given line uses and to test the role of the retro date and tail in closing coverage gaps.

How Each Trigger Responds

Retroactive Date and Tail Coverage

A claims-made policy uses a retroactive date: injuries occurring before it are not covered even if the claim arrives during the period. When a claims-made policy ends, an Extended Reporting Period (ERP, or "tail") lets the insured report claims after expiration for acts that occurred during the policy term:

• Basic (mini) tail — a short automatic window (often 60 days) included at no charge.
• Supplemental (full) tail — a purchased, often unlimited reporting window covering acts before expiration.

Worked Trigger Scenario

A contractor's faulty work in 2023 causes property damage discovered and claimed in 2026. An occurrence policy in force in 2023 responds, regardless of the 2026 filing. A claims-made policy responds only if a policy is in force in 2026 and the 2023 act is on or after its retroactive date — otherwise the insured needs tail coverage. This timing fork is the most heavily tested liability concept and explains why professional and CGL claims-made buyers must guard the retroactive date and purchase tail coverage when switching insurers.

Why Insurers Use Each Trigger

Insurers favor claims-made triggers for long-tail exposures — medical malpractice, professional liability, environmental, and product claims — where injury may surface years after the act, because it lets them reserve and price more accurately and "close the books" on expired policies. Occurrence triggers dominate ordinary CGL and personal lines, where losses manifest near the time of the act.

For the insured, the trade-off is administrative: occurrence coverage is simpler and gap-free, while claims-made requires vigilant attention to the retroactive date and a tail purchase when changing carriers or retiring, or coverage can disappear for past acts.