11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates

The Two CGL Coverage Triggers

ISO publishes the CGL in two trigger forms. CG 00 01 is the occurrence form; CG 00 02 is the claims-made form. The trigger determines which policy year responds to a loss - a distinction that matters enormously for "long-tail" liability such as construction defects, pollution, and products claims that surface years after the work or sale.

• Occurrence trigger: the policy in force when the bodily injury or property damage occurred responds, no matter when the claim is later reported - even decades later.
• Claims-made trigger: the policy in force when the claim is first made against the insured responds, provided the injury happened on or after the retroactive date.

Why Occurrence Coverage Is "Self-Tailing"

Under an occurrence policy, the insurer's obligation attaches the instant covered damage takes place. If a product injures someone in 2026 but the lawsuit is not filed until 2031, the 2026 occurrence policy pays - even though that policy expired years earlier. This built-in protection for late-reported claims is why occurrence forms are described as having automatic "tail" coverage and why they are the dominant CGL form for most main-street businesses.

The downside for insurers is incurred-but-not-reported (IBNR) uncertainty: reserves must be held for years for occurrences that have not yet produced claims.

Claims-Made Mechanics: Retroactive Date and Reporting

Claims-made coverage requires two conditions be met simultaneously: (1) the injury or damage occurred on or after the retroactive date, and (2) the claim is first made during the policy period (or any applicable Extended Reporting Period).

The retroactive date (retro date) is the line in the sand. Any loss-causing event before the retro date is never covered, regardless of when the claim arrives. Advancing the retro date forward (a later date) is a reduction in coverage and is treated as a material change that may require offering an Extended Reporting Period.

Extended Reporting Periods (Tail Coverage)

Because a claims-made policy only responds while it is in force, switching carriers or going bare creates a gap for claims reported after expiration. ISO addresses this with Extended Reporting Periods (ERPs), commonly called tail coverage:

• Basic Tail (Basic ERP): automatic, no charge, provided by endorsement. It gives a short window - 60 days to report claims, and five years to report claims for occurrences already reported as potential claims during the policy period via the 60-day notice.
• Supplemental Tail (Supplemental ERP): must be requested in writing within 60 days of policy expiration and is purchased for an additional premium. It provides an unlimited reporting period for covered claims.

Laddering Claims-Made Maturity

Claims-made premiums start low and rise each year as the policy "matures" - because each renewal year exposes the insurer to one more year of past acts back to the retro date. A first-year (immature) claims-made policy is cheap; a mature (typically 5th-year) policy charges near full rate. This is why an insured switching from occurrence to claims-made should never reset the retro date forward - doing so silently strips coverage for acts in the gap years and is a classic exam trap testing whether the producer understands continuity of the retroactive date.

Worked Timeline: Claims-Made With a Retro Date

A consultant buys a claims-made CGL with a retro date of 1/1/2023, renewed annually. Consider three scenarios:

1. Error in 2022, claim filed 2024 - Not covered. The wrongful act predates the 1/1/2023 retro date, so no claims-made policy responds.
2. Error in 2023, claim filed 2025 while the policy is active - Covered. The act is after the retro date and the claim is made during a policy period.
3. Error in 2024, policy non-renewed 12/31/2025, claim filed 3/2026 - Covered only if an ERP applies. The basic 60-day tail would not reach March 2026; a purchased Supplemental ERP (unlimited reporting) would respond.

Laddering Retro Dates and the Tail/Nose Choice

As a claims-made program matures, the retroactive date ideally stays fixed at the original first claims-made inception (full prior acts), so each renewal still reaches back to the start. When switching carriers, the insured chooses between buying tail (ERP) from the expiring insurer to cover claims reported after expiration, or obtaining nose coverage (prior-acts) from the new insurer by matching the old retro date. Either approach closes the gap; buying neither leaves acts before the new policy uncovered. The exam frames this as a switching scenario and asks which option prevents a coverage gap for past work.

Worked Timeline: Claims-Made With a Retro Date

A claims-made CGL has a retroactive date of January 1, 2023 and runs Jan 1, 2025–Jan 1, 2026. (a) A wrongful act in 2022 (before retro) produces a 2025 claim — not covered (act predates retro date). (b) An act in 2024 producing a claim first made in 2025 — covered (act after retro, claim during the period). (c) An act in 2024 with a claim first made in 2027 — covered only if a tail/ERP was purchased. Walking the act date against the retro date, then the claim date against the policy period, is the exact two-step the exam rewards.