8.3 Occurrence vs. Claims-Made Triggers
Key Takeaways
- An OCCURRENCE policy covers injury or damage that takes place during the policy period, no matter when the claim is later reported — the trigger is when the harm happens.
- A CLAIMS-MADE policy covers claims FIRST MADE during the policy period, provided the injury occurred on or after the retroactive date — the trigger is when the claim is reported.
- The retroactive date and the Extended Reporting Period (tail) are the two devices that prevent coverage gaps when switching claims-made policies.
- Claims-made premiums start low and step up over five years as exposure matures (the 'maturing' of the policy), then level out at the mature rate.
- Long-tail exposures (professional liability, products, pollution) favor claims-made because the insurer can close its books; short-tail exposures stay on occurrence forms.
Two Ways to Trigger Coverage
Liability forms answer one critical question: which policy responds when injury and the resulting claim fall in different years? The answer is the coverage trigger.
| Trigger | What Activates Coverage | Typical Forms |
|---|---|---|
| Occurrence | The injury or damage happens during the policy period | CGL (CG 00 01), Personal Auto, Homeowners |
| Claims-made | A claim is first made against the insured during the policy period | CGL (CG 00 02), most professional liability, D&O |
Both triggers can be written on the ISO Commercial General Liability form — CG 00 01 is the occurrence version and CG 00 02 is the claims-made version.
The Occurrence Trigger
An occurrence policy responds if the bodily injury or property damage takes place during the policy period, regardless of when the claim is later reported — even years later. This is ideal for short-tail exposures where harm and discovery are close in time.
Example: A 2024 occurrence policy covers a slip-and-fall that happened in 2024 even if the injured party does not sue until 2027. The 2024 policy — not the 2027 one — responds.
The Claims-Made Trigger
A claims-made policy responds only if the claim is first made during the policy period AND the injury occurred on or after the retroactive date. This lets insurers "close their books" on long-tail exposures — medical malpractice, products, pollution — where injury may surface decades later.
Two Critical Devices
- Retroactive date — the earliest date of injury the policy will cover. An injury BEFORE this date is never covered, even if the claim is made during the policy period.
- Extended Reporting Period (ERP / "tail") — extends the time to REPORT claims after the policy ends, covering injuries that occurred during the active period but are reported later. A basic tail is automatic and short; a supplemental tail is purchased and longer.
How a Claims-Made Policy Matures
A claims-made policy that keeps the same retroactive date covers a growing window of past injuries each year, so its rate rises through five step factors until it reaches the mature rate:
| Policy Year | Typical Step Factor | Premium on $10,000 Mature Rate |
|---|---|---|
| Year 1 (first) | 0.40 | $4,000 |
| Year 2 | 0.65 | $6,500 |
| Year 3 | 0.85 | $8,500 |
| Year 4 | 0.95 | $9,500 |
| Year 5 (mature) | 1.00 | $10,000 |
Trap: Year 1 claims-made is CHEAP because it covers only injuries since the retroactive date — a thin slice of exposure. The first-year savings disappear as the policy matures.
Avoiding Coverage Gaps
When an insured switches carriers, two pairings prevent a gap:
- Buy a tail (ERP) on the expiring policy to report later-discovered claims, OR
- Set the new policy's retroactive date to match the original — so the new insurer picks up old injuries.
- Nose coverage — prior-acts coverage purchased from the NEW insurer (retro date pushed back).
- Tail coverage — extended reporting purchased from the OLD insurer.
Memory aid: Tail = old policy looking forward; Nose = new policy looking backward.
Injury occurs in 2024 but the claimant does not file a lawsuit until 2027. The insured has held an OCCURRENCE policy every year. Which policy year responds?
On a claims-made policy, what does the retroactive date establish?
Tail and Nose Coverage in Claims-Made Policies
Because claims-made coverage responds only to claims first made during the policy (or extended reporting) period on or after the retroactive date, two devices close the gaps when an insured switches carriers:
- Extended Reporting Period (ERP / "tail") — bought when a claims-made policy is cancelled or non-renewed; it extends the time to report claims for occurrences that happened before the policy ended. A basic tail is short and often automatic (e.g., 60 days); a supplemental tail can be unlimited.
- Prior Acts / "nose" coverage — when buying a new claims-made policy, the insured negotiates a retroactive date earlier than the new policy's inception so prior incidents remain covered.
| Device | When used | What it protects |
|---|---|---|
| Tail (ERP) | Leaving a claims-made policy | Late-reported claims from past occurrences |
| Nose (prior acts) | Starting a new claims-made policy | Incidents before the new policy began |
Trap: an occurrence policy needs no tail — it responds whenever the injury happened during the policy period, no matter when the claim is reported. Tail/nose are claims-made concepts.
A professional is cancelling a claims-made policy and worries about claims that may be reported after the policy ends for incidents that already occurred. What should the insured purchase?
Retroactive Dates and the Five Claims-Made Steps
A claims-made policy responds only when both conditions are met: the claim is first made during the policy or extended reporting period, and the injury occurred on or after the retroactive date. The retroactive date is the line in the sand — losses before it are never covered no matter when reported.
The exam often presents a maturation timeline:
- Year 1 – first claims-made policy with retro date = inception. Only year-1 occurrences/claims covered.
- Years 2–4 – mature policy. Retro date stays fixed; the covered window grows as more past years fall after the retro date.
- Switching carriers – set the new policy's retro date to the original date (nose coverage) to avoid a gap.
- Leaving claims-made entirely – buy a tail (ERP) to report later claims for past occurrences.
- Advancing the retro date – dangerous; it strands earlier occurrences.
Exam tip: a loss that occurred before the retroactive date is excluded even if the claim is made during the policy period. Occurrence policies avoid this entirely by triggering on when the injury happened.