8.3 Occurrence vs. Claims-Made Triggers
Key Takeaways
- An occurrence policy (ISO CG 00 01) covers injury that occurs during the policy period, whenever the claim is later reported.
- A claims-made policy (ISO CG 00 02) covers a claim only if first made during the policy period AND the injury occurred on or after the retroactive date.
- The retroactive date is the earliest injury date that can be covered; injury before it is never covered regardless of report date.
- An extended reporting period (tail) extends the time to report claims — basic ERP is free, supplemental ERP is purchased — but does not move the retro date.
- Claims-made premiums step up over years one through five until the policy matures and approaches occurrence-policy cost.
Why Coverage Triggers Matter
A liability coverage trigger is the event that activates a policy's promise to pay. Because bodily injury and property damage often surface years after the negligent act (think asbestos, slow chemical leaks, or latent construction defects), the industry developed two trigger designs. Knowing which form responds — and when — is one of the most heavily tested concepts on the casualty portion of the exam.
The two ISO Commercial General Liability triggers are:
| Form | Trigger | ISO number |
|---|---|---|
| Occurrence | Injury that occurs during the policy period, whenever the claim is later reported | CG 00 01 |
| Claims-made | A claim first made during the policy period, for injury occurring on or after the retroactive date | CG 00 02 |
The Occurrence Form (CG 00 01)
An occurrence policy responds to injury that takes place during the policy period, no matter how long afterward the claim is reported. If a 2026 occurrence policy is in force when the injury happens, it pays even if the lawsuit arrives in 2034 — long after that policy expired. This makes occurrence coverage simple and durable, but it forces insurers to hold reserves for long-tail claims for many years, which is why occurrence forms generally cost more for hazardous classes.
The Claims-Made Form (CG 00 02)
A claims-made policy responds only if both conditions are met: (1) the claim is first made against the insured during the policy period (or its extended reporting period), and (2) the injury occurred on or after the retroactive date.
The retroactive date is the earliest injury date the policy will cover. Injury that occurred before the retro date is never covered, no matter when the claim is reported. The retro date is usually set when the insured first buys claims-made coverage and should not advance at renewal, or a coverage gap opens.
Extended Reporting Periods (Tail Coverage)
Because a claims-made policy needs the claim reported during the period, the insured needs protection after the policy ends. That is the Extended Reporting Period (ERP), or tail:
| ERP | What it does | Cost |
|---|---|---|
| Basic (mini-tail) | Automatic short window (e.g., 60 days to report; longer to discover) | Free / automatic |
| Supplemental (full tail) | Long or unlimited reporting window purchased by endorsement | Purchased |
Critical exam point: An ERP extends the time to report a claim; it does not move the retroactive date and does not extend the coverage to new occurrences. It only buys time to report claims for injuries that already occurred within the covered window.
A claims-made CGL policy has a retroactive date of January 1, 2024. An injury occurred in June 2023, and the claim is first made in 2026 while the policy is in force. Is the claim covered?
Step-Up Premiums and Policy Maturity
In the first year a claims-made policy is written, the insurer is exposed only to claims arising from a single year of occurrences (those after the retro date). With each renewal, the band of covered occurrence-years widens, so the insurer's exposure — and the premium — steps up through roughly years one to five. Once the policy matures (around year five), its premium approaches that of a comparable occurrence policy, because by then it covers nearly the same span of prior occurrences.
This is why moving from one claims-made insurer to another raises the gap question: the new insurer may set a new, later retro date or require the old insurer's tail to be purchased. The exam's favorite traps live in these transitions:
- Switching carriers without buying tail or without carrying the prior retro date forward leaves a gap for old, unreported injuries.
- Advancing the retro date at renewal quietly strips coverage for injuries between the old and new retro dates.
- Going from claims-made to occurrence generally requires tail on the expiring claims-made policy to cover late-reported old claims.
Choosing Between the Forms
Occurrence coverage is preferred where the buyer wants certainty and a clean, permanent record of each policy year — but it is pricier for long-tail exposures. Claims-made coverage costs less in early years and is standard for professional liability (medical malpractice, E&O, D&O) where reporting patterns are predictable, provided the insured diligently maintains the retro date and buys tail when leaving. For the exam, remember the one-line summary: occurrence = when it happened; claims-made = when it was reported (plus a retro date floor).
An insured is replacing a claims-made policy with an occurrence policy. What should the insured purchase on the expiring claims-made policy to avoid a gap for late-reported claims?
Reading a Trigger Problem Step by Step
Trigger questions reward a fixed routine. First, identify the form: occurrence (CG 00 01) or claims-made (CG 00 02). Second, for occurrence forms, ask only one question — did the injury occur during the policy period? If yes, that policy pays no matter when the claim arrives. Third, for claims-made forms, ask two questions in order: was the claim first made during the period (or ERP)? and did the injury occur on or after the retroactive date? Only a "yes" to both triggers coverage.
Consider a layered fact pattern. An insured had occurrence policies in 2020 and 2021, then switched to a claims-made policy with a 2022 retro date for 2022-2026. A worker is exposed to a harmful substance in 2021, becomes ill, and sues in 2025.
- The 2021 occurrence policy responds, because the injury occurred during its term — the late 2025 report is irrelevant to an occurrence form.
- The current claims-made policy does not respond, because the injury (2021) predates its 2022 retro date, even though the claim was made during its term.
This illustrates why occurrence coverage is prized for long-tail exposures and why advancing or mishandling a retro date is dangerous.
Practical Transition Rules
When an insured changes carriers, the producer must protect the reporting window. The cleanest options are to have the new claims-made insurer accept the prior retro date (so the coverage band is continuous) or to buy a supplemental ERP (tail) on the expiring policy. Going from occurrence to claims-made rarely needs tail because the old occurrence policies already locked in their years; going from claims-made to occurrence almost always needs tail on the expiring claims-made policy. Misorder these and you create exactly the gap the exam is testing.