8.3 Occurrence vs. Claims-Made Triggers

Why the Trigger Matters

A coverage trigger is the event that activates a liability policy. The two ISO trigger forms are the Occurrence form (ISO CG 00 01, Commercial General Liability Coverage Form) and the Claims-Made and Reported form (ISO CG 00 02). The trigger determines which policy year responds when injury and the lawsuit happen in different years—a frequent exam scenario with "long-tail" claims like asbestos, mold, and pollution.

• Occurrence trigger: coverage applies if the bodily injury or property damage occurs during the policy period, no matter when the claim is filed—even years later.
• Claims-made trigger: coverage applies if the claim is first made against the insured during the policy period (CG 00 02 adds that it must also be reported during the period or an extension).

Claims-Made Mechanics: Retroactive Date and Tail

Claims-made forms rely on two control dates the exam loves:

• Retroactive date—the earliest date an injury can occur and still be covered. Injury before the retro date is never covered, even if the claim is filed in-period.
• Extended Reporting Period (ERP), or "tail"—extends the time to report claims after the policy ends:
  • Basic tail: automatic; a 60-day window for claims on occurrences reported during the policy.
  • Midi-tail: automatic 5-year window for claims from occurrences already reported.
  • Supplemental ERP: purchased by endorsement, usually unlimited; request within 60 days of expiration.

A tail closes the gap created when an insured switches from claims-made to occurrence or to a new insurer.

Side-by-Side Comparison

Claims-made starts cheaper because few claims are reported early, then "steps up" toward mature pricing—usually by year five.

Worked Example: Which Policy Responds?

An insured installs a product in 2022. The defect causes injury that manifests in 2024, and the injured party sues in 2026. The insured carried:

• 2022 Occurrence policy, then
• 2024-2026 Claims-made policy with a 2023 retroactive date.

Occurrence analysis: the BI must occur during the policy period. If injury "occurs" when it manifests (2024), the 2022 occurrence policy is not triggered by the 2022 install alone unless injury occurred then. Claims-made analysis: the claim is first made in 2026 (in-period), but the injury (2024) is after the 2023 retro date—so the claims-made policy responds. Had the retro date been 2025, the 2024 injury would be barred.

Switching Forms Without Creating Gaps

Gaps appear at the seams between policies, and the exam tests how to avoid them:

• Occurrence → claims-made: set the new policy's retroactive date back to the start of the old occurrence policy so prior-period injuries that surface later stay covered.
• Claims-made → occurrence: buy a supplemental ERP (tail) on the expiring policy; the new occurrence policy covers only injuries from its inception forward.
• Claims-made → claims-made (new insurer): the new insurer should provide prior acts (nose) coverage matching the old retro date, or buy a tail.

A laser (excluding a specific known exposure) or an advanced retro date on renewal can quietly create the very gap the insured is trying to close.

Step Rating and Pricing Discipline

Claims-made policies are step-rated during the first several years because the universe of compensable claims grows each year until the retro date is mature:

The steep early discount is why claims-made dominates professional liability (medical malpractice, D&O, E&O), where long reporting lags make occurrence pricing volatile. The trade-off: an insured who lets a claims-made policy lapse without buying a tail loses coverage for not-yet-reported claims entirely—an exam favorite "gotcha."

The Coverage Trigger Problem

Liability harm sometimes surfaces years after the negligent act, as with toxic exposure or construction defects. The coverage trigger decides which policy responds. An occurrence policy is triggered by when the injury or damage happens, even if the claim is reported years later. A claims-made policy is triggered by when the claim is first made against the insured, provided the wrongful act occurred after the policy's retroactive date. Choosing the wrong trigger is the single biggest source of error in coverage-timing questions.

Retroactive Dates and the Extended Reporting Period

Claims-made policies use two date controls. The retroactive date sets the earliest wrongful-act date for which a claim will be covered; acts before it are excluded. The extended reporting period (ERP, or "tail") lets the insured report, after the policy ends, claims arising from covered acts that occurred during the policy period. A basic (mini) tail is automatic for a short window (often 60 days), while a supplemental tail is purchased for longer protection, crucial when an insured retires or switches to a different carrier.

Avoiding Gaps When Switching Carriers

When an insured moves from occurrence to claims-made coverage, or changes claims-made insurers, gaps can open. "Nose" coverage (prior acts) on the new policy sets the retroactive date back to cover earlier acts, while "tail" coverage on the expiring policy covers late-reported claims from the old period. The exam rewards recognizing that occurrence coverage rarely needs a tail, whereas a departing claims-made insured almost always needs either a tail or matching prior-acts coverage to stay continuously protected.