8.3 Occurrence vs. Claims-Made Triggers

What a Coverage Trigger Is

A coverage trigger is the event that activates the policy. For liability insurance, the two triggers tested on the national exam are occurrence and claims-made. The distinction drives which policy responds to a long-tail loss (asbestos, mold, professional errors) where the injury and the lawsuit may be years apart. ISO publishes both the CG 00 01 (Occurrence) and CG 00 02 (Claims-Made) Commercial General Liability coverage forms.

Occurrence Trigger (CG 00 01)

An occurrence policy responds when the bodily injury or property damage takes place during the policy period, regardless of when the claim is filed. A claim reported 10 years after a covered policy expires is still covered if the injury happened during that policy term.

• Advantage: no gap; old policies keep responding to late-emerging claims.
• Limit pitfall: the limits of the old policy apply, which may be inadequate decades later.

Claims-Made Trigger (CG 00 02)

A claims-made policy responds only when the claim is first made during the policy period (or extended reporting period), and the injury occurred on or after the retroactive date. Two conditions must both hold: claim made in-period and injury after the retro date.

Key Claims-Made Components

Exam trap: Do not let the retroactive date advance past the original date when renewing claims-made coverage — doing so opens a coverage gap for injuries between the old and new retro dates.

Worked Scenario — Which Policy Pays?

An insured has occurrence CGL in 2018 and switches to claims-made (retro date 1/1/2021) in 2021. A customer is injured by the product in 2019 but does not sue until 2023.

• The 2018–2019 occurrence policy responds because the injury occurred during its term — even though the suit comes four years later.
• The 2021 claims-made policy does not respond: the injury (2019) predates its 1/1/2021 retroactive date, so it is excluded even though the claim is made while that policy is active.

This is the classic reason an insured buying claims-made should set the retro date back to the start of prior continuous coverage or buy tail coverage when leaving an occurrence program.

Claims-Made Step Premiums

Claims-made premiums rise each year ("step rating") as the exposure period between the retro date and the present lengthens, until reaching a mature rate around year five. This is why a first-year claims-made policy is cheaper than the equivalent occurrence policy — a frequent exam comparison.

Occurrence vs. Claims-Made Triggers

A coverage trigger decides which policy responds to a loss. The two systems are central to liability:

Occurrence policies respond based on when the harm occurred; claims-made respond based on when the claim is reported, provided the wrongful act happened on or after the retroactive date.

Retroactive Date and Tail Coverage

A claims-made policy has two date controls. The retroactive date is the earliest date a covered wrongful act can have occurred; acts before it are not covered no matter when the claim arrives. An Extended Reporting Period (ERP, or "tail") lets the insured report claims after the policy ends for acts that occurred during the policy term — essential when switching insurers or retiring, so a late-reported claim does not fall into a gap.

A basic (mini) tail is automatic and short (often 60 days for reporting, plus a longer 5-year window for late-reported known claims); a supplemental (full) tail is purchased for a longer or unlimited reporting window. Worked point: a consultant who lets a claims-made policy lapse without buying tail coverage has no protection for a lawsuit filed next year over last year's advice — the classic reason to buy the ERP.

Why Long-Tail Claims Drove Claims-Made Forms

Claims-made coverage exists because some exposures surface years after the act — professional errors, pollution, product defects. On an occurrence form, the insurer cannot close its books, since a policy written today might pay a claim a decade later when the injury manifests. Claims-made lets the insurer reserve more accurately by tying coverage to the report date, which is why professional liability, D&O, and pollution forms favor it.

Coordinating Successive Claims-Made Policies

When an insured renews claims-made coverage year after year, the retroactive date ideally stays the same so the coverage window keeps expanding. Advancing or dropping the retroactive date on renewal can silently strip coverage for older acts — a tested pitfall. If the insured switches to a new occurrence insurer, buying a tail (ERP) on the expiring claims-made policy fills the gap for acts committed but not yet reported. Conversely, a new claims-made insurer can offer prior acts (nose) coverage by setting an earlier retroactive date. Matching tail vs. nose coverage to a transition scenario is a frequent exam item.