11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates

Two Coverage Triggers

The CGL is sold on two different forms that differ only in their coverage trigger - the event that activates a policy:

• Occurrence form (ISO CG 00 01): triggers when the bodily injury or property damage occurs (happens) during the policy period, no matter when the claim is reported - even years later.
• Claims-Made form (ISO CG 00 02): triggers when the claim is first made against the insured during the policy period (or extended reporting period), provided the injury occurred on or after the retroactive date.

The occurrence form dominates the small-commercial market because it is simpler and avoids gaps. Claims-made is used for long-tail exposures - products, professional, and pollution-type risks - where injuries may surface decades after the act.

The Retroactive Date and Two Triggers

A claims-made policy actually has two triggers that must BOTH be satisfied:

1. The injury must occur on or after the retroactive date, and
2. The claim must be first made during the policy period (or its extended reporting period).

If either fails, there is no coverage. A claim is "first made" the moment the insured receives a written demand or the insurer is notified - whichever is earlier.

Worked timeline

A claims-made CGL runs Jan 1 - Dec 31, 2026, with a retroactive date of Jan 1, 2022. Test each scenario:

• Injury 2021 (before retro), claim filed 2026 -> NOT covered (pre-retro injury)
• Injury 2023, claim filed 2026 -> Covered (injury after retro, claim made in period)
• Injury 2025, claim filed 2028 with no tail -> NOT covered (claim made after expiration)

Extended Reporting Periods (Tail Coverage)

When a claims-made policy ends, late-reported claims would fall through the cracks. ISO provides Extended Reporting Periods (ERPs):

• Basic ERP (Mini-Tail): automatic, no charge. Reports claims within 60 days of expiration for occurrences before expiration, and gives 5 years for occurrences reported (as incidents) within 60 days.
• Supplemental ERP (Full Tail): must be purchased within 60 days of expiration; provides an unlimited reporting window with a reinstated aggregate (a fresh limit).

Avoiding Coverage Gaps and Why Premium Steps Up

When a business switches insurers or from occurrence to claims-made (or vice versa), the retroactive date is the key to avoiding a gap. A new claims-made insurer should carry forward the original retroactive date; if it pushes the date forward, the period between the old and new dates becomes uninsured.

Claims-made premiums step up for roughly five years - called the maturity of the policy. A first-year ("first-step") claims-made policy is cheapest because the only claims it can pay are those for injuries occurring that same year. A mature (5th-year) claims-made policy costs nearly as much as an occurrence policy because it must respond to claims for injuries reaching back to the retroactive date.

Trap: Buying claims-made saves money short-term but creates a tail liability at termination. The cost of a supplemental ERP can equal 150% to 200% of the expiring annual premium.

Stacking of Limits - Occurrence Advantage

Because an occurrence policy responds based on when injury happened, a long-tail claim can potentially access the limits of whichever policy year the injury occurred in. With claims-made, only the single policy in force when the claim is made responds - its limit is not added to prior years.

Prior Acts ("Nose") Coverage

The mirror image of tail coverage is prior-acts or "nose" coverage. When an insured moves to a new claims-made insurer, the new carrier can agree to set the retroactive date back to the original date, picking up incidents from the prior policy that have not yet been reported. This avoids buying an expensive tail from the old insurer. The exam contrasts the two: tail (ERP) extends the reporting window forward on the expiring policy; nose (prior acts) reaches backward on the new policy.

Why Long-Tail Lines Use Claims-Made

Lines such as products liability, environmental, and professional liability are called long-tail because the gap between the negligent act and the manifestation of injury can span decades (asbestos and pharmaceutical claims are classic examples). On an occurrence form the insurer cannot close its books - it remains exposed to incurred but not reported (IBNR) losses for years. Claims-made lets the insurer match premium to the claims actually reported each year, which is why it is the standard trigger for these volatile exposures.

Trap: A first-year claims-made policy with NO retroactive date defaults to the policy inception as the retroactive date - meaning it covers only injuries occurring that year and offers no prior-acts protection.

Worked Trigger Comparison

Lock in the trigger logic with a timeline. A contractor's faulty work in 2022 causes property damage that is discovered, and a claim made, in 2025. Under an occurrence policy the 2022 policy responds because the damage occurred then, accessing the limits in force that year, even if the contractor changed insurers afterward. Under a claims-made policy the 2025 policy responds because that is when the claim was made, but only if its retroactive date is 2022 or earlier; if the 2025 policy's retroactive date is 2024, the claim is denied because the act predates the retro date.

Now add a termination: the contractor lets the claims-made policy lapse at the end of 2025 without buying a tail. A claim arriving in 2026 for the 2022 act has no policy to report under, because claims-made requires the claim to be made during the policy period or an extended reporting period. A purchased supplemental ERP (tail) would have preserved the right to report that late claim, which is why the tail is essential at termination.

The exam reduces this to three questions you should ask on every trigger problem: when did the injury or damage occur, when was the claim first made, and what is the retroactive date. Occurrence turns on the first; claims-made turns on the second and third together. Mastering that sequence resolves nearly every CGL trigger question.

Key takeaway: An occurrence policy responds based on when injury happens and can stack the limits of the policy year of occurrence, while a claims-made policy responds based on when the claim is made and only if the act follows the retroactive date. Carry the original retroactive date forward when switching carriers, buy a tail at termination, and remember that a missing retro date defaults to policy inception, leaving no prior-acts protection.