8.3 Occurrence vs. Claims-Made Triggers
Key Takeaways
- An occurrence policy covers injury/damage that HAPPENS during the policy period, regardless of when the claim is filed — ideal for long-tail exposures.
- A claims-made policy covers claims FIRST MADE during the policy period (and on or after the retroactive date), even for injuries that occurred earlier.
- The retroactive date excludes events before it; advancing or eliminating it creates coverage gaps — a top exam trap.
- Extended Reporting Periods (ERPs) — the basic/mini-tail and a supplemental tail — cover claims reported after a claims-made policy ends.
- The ISO CGL is offered in both CG 00 01 (occurrence) and CG 00 02 (claims-made) forms; professional liability is usually claims-made.
Two Ways to Trigger Coverage
Liability policies decide which period responds to a loss using one of two triggers. The distinction matters most for long-tail exposures — injuries (asbestos, pollution, malpractice) that surface years after the negligent act.
| Feature | Occurrence Form | Claims-Made Form |
|---|---|---|
| Trigger | Injury/damage occurs during the period | Claim is first made during the period |
| ISO CGL form | CG 00 01 | CG 00 02 |
| Late claims | Covered if injury occurred in-period | Covered only if reported in-period (or ERP) |
| Retroactive date | Not used | Critical — limits prior acts |
| Premium maturity | Stable | Rises over first ~5 years ('step factor') |
Core rule: Occurrence = when did it happen? Claims-made = when was it reported?
The Occurrence Trigger
Under an occurrence policy (CG 00 01), coverage attaches if the bodily injury or property damage takes place during the policy period, no matter when the claim is eventually filed — even decades later. The policy in force at the time of injury responds.
- Advantage: No coverage gap; the insured keeps protection for past periods forever.
- Disadvantage: Insurers face IBNR (incurred-but-not-reported) uncertainty and must hold reserves for years; this drives higher long-tail pricing.
Worked timeline
A contractor's faulty work in 2022 causes a wall to collapse and injure a visitor in 2026. Under an occurrence policy, the 2022 policy (the year the negligent work/injury process began) is the one analyzed for the trigger — the claim is covered even though the policy expired years earlier.
The Claims-Made Trigger and the Retroactive Date
A claims-made policy (CG 00 02) responds when a claim is first made against the insured during the policy period, provided the injury occurred on or after the retroactive date.
- Retroactive (retro) date: the earliest date of injury the policy will cover. Injury before the retro date is excluded even if the claim is made in-period.
- Trap — advancing the retro date: if a renewal moves the retro date forward (or to the current date), all injuries between the old and new date become uninsured — a deliberate gap to test.
Extended Reporting Periods (ERPs / 'tails')
Because coverage ends when the policy ends, claims-made policies offer tails for claims reported after expiration:
- Basic ERP (mini-tail): automatic, short (typically 60 days to report; up to 5 years for occurrences known during the period).
- Supplemental ERP (full tail): purchased for an extra premium, often unlimited in duration, covering future claims for pre-expiration injuries.
Coverage Triggers Compared
A liability policy's trigger determines which policy year responds to a claim - a frequently tested and frequently misunderstood concept.
| Trigger | Responds when | Key feature |
|---|---|---|
| Occurrence | Injury or damage happens during the policy period, no matter when the claim is filed | Simpler; "long-tail" claims covered by the year of occurrence |
| Claims-made | The claim is first made during the policy period (and on/after the retroactive date) | Requires an unbroken chain of coverage; needs tail coverage when discontinued |
Claims-made policies use two devices the exam tests heavily:
- Retroactive date - the earliest date an occurrence can have happened and still be covered; injuries before it are excluded.
- Extended Reporting Period (ERP / "tail") - lets the insured report, after the policy ends, claims for occurrences during the policy period. A basic (mini) tail is automatic and short; a supplemental tail is purchased and may be unlimited.
Exam trap: An occurrence policy is triggered by when the damage occurs; a claims-made policy by when the claim is reported (subject to the retroactive date). When switching carriers or retiring, a claims-made insured needs tail coverage or a matching prior-acts (nose) retroactive date to avoid a gap. Occurrence forms are standard for premises/products; claims-made dominates professional liability and D&O.
A claims-made CGL has a retroactive date of 1/1/2023 and a policy period of 1/1/2026–12/31/2026. An injury occurred on 6/1/2022, and the claim is first made against the insured on 3/1/2026. Is the claim covered?
Matching Trigger to Exposure
Insurers choose the trigger that best controls long-tail uncertainty.
- Occurrence is standard for general liability, premises/operations, and products where the insured wants permanent protection for past periods.
- Claims-made dominates professional liability (medical malpractice, lawyers/accountants E&O, D&O) because the long, unpredictable gap between an error and a lawsuit makes occurrence pricing unworkable.
First-dollar reporting trap: Under claims-made, what matters is the date the claim is made, not when the insured first suspected a problem. A demand letter, a lawsuit, or a written notice can each be the triggering 'claim' — read the policy's definition.
Laser Provisions and Stacking Limits
Claims-made programs add wrinkles the exam likes to probe.
- Maturity / step factors: a claims-made policy is cheaper in year one because few prior years are exposed; premiums step up over roughly five years until the policy reaches maturity.
- Laser exclusions: an insurer may 'laser out' a specific known claimant or location by endorsement, denying coverage for that exposure while covering everything else.
- Limits do not stack: only the policy in force when the claim was first made responds; limits from prior years are not stacked. Occurrence policies are likewise tied to the single year of injury.
Tail-purchase trap: A supplemental Extended Reporting Period must usually be elected within 60 days of policy termination. Miss the window and the insured loses the chance to buy tail coverage, leaving past-period claims uninsured.
Which statement BEST distinguishes an occurrence policy from a claims-made policy?