11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates

Two Coverage Triggers, Two ISO Forms

The CGL is written on one of two ISO forms, and the difference - the coverage trigger - is the most heavily tested concept in commercial liability.

Occurrence is the default and is far more common. Claims-made is used for long-tail exposures (pollution, products, professional services) where injuries surface years after the negligent act.

The Occurrence Trigger

An occurrence policy responds if the injury or damage happened during the policy period, no matter when the claim is filed.

Worked example

A contractor holds an occurrence CGL for 2024 only. A balcony the contractor built collapses and injures a tenant in December 2024, but the lawsuit is not filed until 2026.

• The 2024 occurrence policy responds, because the bodily injury occurred in 2024.
• It does not matter that the policy expired and the claim arrived two years later - the trigger is the date of injury.

This built-in "tail" is why occurrence coverage is preferred when available: a policyholder who lets the policy lapse is still protected for past occurrences.

The Claims-Made Trigger and the Retroactive Date

A claims-made policy responds only when both of two conditions are met:

1. The claim is first made against the insured during the policy period (or an Extended Reporting Period), and
2. The injury occurred on or after the retroactive date shown in the Declarations.

The retroactive date is the earliest date of injury the policy will cover. Injuries before it are excluded even if the claim arrives during the policy term.

Worked example

A consultant's claims-made CGL is in force for 2024 with a retroactive date of 2020:

Trap: Advancing or moving a retroactive date forward narrows coverage and can create a gap; on renewal, insurers generally keep the original retro date to preserve continuity.

Extended Reporting Periods (Tails) - Claims-Made Only

When a claims-made policy is cancelled or non-renewed, claims for past covered injuries may still arrive. Extended Reporting Periods (ERPs) preserve the ability to report them.

• Basic ERP (the "mini-tail"): automatic and free. It reports claims for occurrences known to the insurer for 60 days after the policy ends, and gives 5 years to report claims for occurrences that were reported during the policy term.
• Supplemental ERP (the "full tail"): purchased by endorsement for an additional premium, providing an unlimited reporting period. It must be requested in writing within 60 days of cancellation or non-renewal.

The retroactive date is not changed by buying a tail. The ERP only extends the reporting window forward; it never reaches injuries earlier than the original retro date.

Switching carriers without a gap

A business moving from one claims-made carrier to another can either buy a tail from the expiring insurer or obtain "prior acts" (nose) coverage from the new insurer that adopts the old retroactive date. One or the other - not both - prevents a coverage gap.

The Five Claims-Made Reporting Tail Options

ISO claims-made CGL offers a structured set of tail provisions worth knowing. The Basic Extended Reporting Period is automatic and free: a 60-day window to report claims plus a 5-year window for claims arising from occurrences reported during the policy. The Supplemental Extended Reporting Period is purchased by endorsement for an unlimited reporting tail, available within 60 days of expiration and not cancelable.

Step Factors and the Retroactive Date Trap

Claims-made premiums rise each year through maturity (years 1-5) as the exposure of covered prior years grows, then level off as a mature policy. The exam's favorite trap: advancing the retroactive date forward (or adding one where none existed) on renewal wipes out coverage for the gap period — a producer who allows this without explaining it courts an E&O claim. When switching carriers, the new claims-made policy should keep the original retroactive date or the insured should buy tail coverage on the expiring policy to avoid an uninsured gap.

Laser Endorsements and Maturity

A claims-made policy can carry specific-entity or specific-act exclusions ("lasers") that carve out a known exposure from coverage going forward. Combined with the retroactive date, lasers let underwriters write a risk that would otherwise be declined. Understanding maturity (premium rising through year five then leveling) and lasers explains why an insured switching carriers must scrutinize the new policy's retroactive date and any added exclusions before letting the old policy expire.