11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates

The Most-Tested Distinction in Commercial Liability

The ISO CGL is written on one of two coverage triggers. The occurrence form (CG 00 01) responds when the bodily injury or property damage occurs during the policy period, regardless of when the claim is finally made. The claims-made form (CG 00 02) responds when the claim is first made against the insured during the policy period (or an extended reporting period), provided the injury did not occur before the retroactive date. Knowing which event triggers coverage is the single most frequently tested concept on the national portion.

Why long-tail exposures use claims-made

Occurrence coverage works well for risks where injury and discovery happen close together. But some exposures - asbestos, pollution, pharmaceuticals, professional services - have a long tail: harm may not surface for years or decades. Under an occurrence policy the insurer cannot close its books, because a claim filed in 2040 may trigger a policy written in 2010. The claims-made form solves this by tying coverage to the report year, letting insurers reserve and price more accurately.

The price of that certainty is the retroactive date. The claims-made form covers a claim only if the triggering injury occurred on or after the retroactive date and the claim is first made during the policy period. Injury before the retroactive date is excluded even if the claim arrives during the active policy.

Claims-made maturity: the five-year premium step-up

A brand-new claims-made policy in its first year covers only claims for injuries that occur and are reported in that same 12 months - a very thin slice of exposure. Each renewal year, the retroactive date stays fixed while the report window extends, so the policy steadily picks up more of the insured's history. By roughly the fifth year the policy is considered mature and the premium reaches its full level.

These step factors are why a claims-made policy looks cheap at inception. The exam expects you to recognize that the low first-year cost is a maturity discount, not a permanent saving.

Laser Dates, Mid-Term Changes, and the ERP Mechanics

For claims-made CGLs, the retroactive date is the fulcrum: a claim is covered only if the injury occurred on or after the retroactive date and the claim is first made during the policy period (or any ERP). Advancing the retroactive date forward — or adding a "laser" that excludes a known exposure — creates a gap the insured must fill with tail coverage.

ISO provides ERPs in tiers: a Basic Extended Reporting Period is automatic and free, granting a 60-day window to report claims for any occurrence plus a 5-year window for occurrences the insurer was notified of during the policy; the Supplemental ERP is purchased (premium capped at a multiple of the expiring premium) for an unlimited reporting tail. A claims-made policy reinstates the full aggregate for the ERP only when a Supplemental ERP is bought. On the exam, switching from claims-made to occurrence, or letting a claims-made policy lapse without buying tail, is the recurring uninsured-gap scenario.

Extended Reporting Periods (tail coverage)

Because a claims-made policy stops responding once it ends, an insured who cancels, retires, or switches carriers needs tail coverage so that claims reported after the policy ends - for injuries during the covered period - are still paid. The CGL provides two Extended Reporting Periods:

• Basic (Mini) Tail - automatic and free. Covers claims first made within 60 days for any occurrence, and within 5 years for occurrences already reported to the insurer within those 60 days. No extra premium.
• Supplemental (Maxi) Tail - must be purchased by endorsement, generally within 60 days of policy termination. It provides an unlimited reporting window for injuries that occurred before the policy end and after the retroactive date. The premium may not exceed 200% of the expiring annual premium.

The ERP does not change the retroactive date and does not provide new limits beyond those in the expiring policy (a fresh aggregate may apply to the supplemental tail).

Gaps, overlaps, and the switching trap

The danger zone is switching between trigger types or carriers. If an insured moves from occurrence to claims-made, the new claims-made policy's retroactive date should match the old policy's inception so no gap opens. If the retroactive date is set to the new policy's inception (called a retro date = inception), every prior-year exposure is uncovered unless prior-acts coverage is purchased.

Conversely, moving from claims-made to occurrence usually requires buying a tail on the expiring claims-made policy, because the new occurrence policy only covers injuries occurring after its inception. Exam trap: candidates assume the new policy automatically covers old injuries - it does not. Always match the retroactive date forward or buy tail coverage backward.