Claims-Made Policy

Claims-Made Policy

A Claims-Made policy is a type of insurance coverage that only protects against claims when both the underlying incident and the formal claim filing occur during the active policy period. This timing requirement distinguishes Claims-Made policies from Occurrence policies and has significant implications for how businesses maintain continuous coverage.

What is a Claims-Made Policy in Insurance?

In insurance, a Claims-Made policy differs fundamentally from an Occurrence policy in how it determines coverage eligibility. An Occurrence policy covers any claim for an event that happened during the coverage period—regardless of when the claim is filed—whereas a Claims-Made policy only provides coverage if both the incident and the filing of the claim happen whilst the policy is active.

Example: Consider a professional liability insurance policy active from January 2020 to January 2021. If a professional error occurs in March 2020 and a lawsuit is filed in April 2020, your Claims-Made policy would cover this claim because both events happened during the active period. However, if the same error leads to a lawsuit filed in February 2021, after your policy has expired, this claim would not be covered under your expired Claims-Made policy unless you have purchased Extended Reporting Period coverage.

Key Components of Claims-Made Policies

Understanding three critical components is essential for properly managing Claims-Made insurance coverage:

Retroactive Date: This is the earliest date from which the insurer will consider coverage for incidents. Any incident occurring before this date is not covered, even if the claim is made during the active policy period. When renewing or switching insurers, maintaining the same retroactive date ensures continuity of coverage for past work.

Policy Period: The specific timeframe during which the policy is active. Only claims made within this period are eligible for coverage. This creates the need for continuous renewal to maintain protection, as any lapse in coverage can leave incidents uncovered even if they occurred during a previously insured period.

Extended Reporting Period (ERP) or Tail Coverage: This optional extension allows policyholders to report claims for incidents that occurred during the policy period but are claimed after the policy has ended. This extension is crucial when retiring, selling a business, or switching to an Occurrence policy, as it maintains protection against late-coming claims that could arise years after the policy expires.

Types of Claims-Made Policies

Claims-Made policies are commonly used across various professional and management liability coverages:

Professional Liability (Professional Indemnity): Widely used by professionals including doctors, lawyers, accountants, architects, and consultants, covering them against claims of malpractice, professional negligence, or errors and omissions in their professional services.

Directors and Officers Liability (D&O): Protects the personal assets of a company's board of directors and officers against claims arising from their management decisions, including allegations of breach of fiduciary duty, mismanagement, or regulatory violations.

Employment Practices Liability (EPL): Provides protection for claims related to employment practices, such as wrongful termination, discrimination, harassment, retaliation, or failure to promote.

Cyber Liability: Offers coverage for claims related to data breaches, network security failures, privacy violations, and other cyber-related liabilities in an increasingly digital business environment.

Exclusions and Limitations

Claims-Made policies do not cover every type of claim. Common exclusions and limitations include:

• Claims related to incidents occurring before the retroactive date


• Intentional illegal acts, fraud, or deliberate omissions


• Claims reported after the policy period without an Extended Reporting Period


• Claims arising from known circumstances that were not disclosed when the policy was purchased


• Claims covered under other specific insurance policies (to avoid duplicate coverage)

It's essential for policyholders to thoroughly understand these exclusions and maintain continuous coverage to avoid gaps in protection. When switching insurers or retiring, purchasing tail coverage ensures that claims arising from past work remain covered even after the policy ends.