What is the difference between a claims-made policy and an occurrence policy?

As a lawyer, I can explain the difference between a claims-made policy and an occurrence policy.

An occurrence policy covers claims that arise from accidents or events that occur during the policy period, regardless of when the claim is actually made. In other words, an occurrence policy covers claims that arise from incidents that occurred while the policy was in effect, even if the claim is filed years later.

On the other hand, a claims-made policy only covers claims that are made during the policy period, regardless of when the incident occurred. This means that if an incident occurred during the policy period, but a claim is not filed until after the policy expires, the claim would not be covered.

One key difference between the two policies is the way in which coverage is triggered. Occurrence policies trigger coverage based on when the incident occurred, whereas claims-made policies trigger coverage based on when the claim is made. This means that if a policyholder switches from an occurrence policy to a claims-made policy, they may not be covered for incidents that occurred before the policy period began unless prior acts coverage is purchased.

It is important to note that claims-made policies typically require a retroactive date, which is the first date on which the policyholder was insured under a claims-made policy. This retroactive date determines how far back coverage will extend for claims based on events that occurred before the policy period. Additionally, claims-made policies may also require a tail policy, which extends coverage for claims that are made after the policy expires but are based on incidents that occurred during the policy period.

In summary, the main difference between a claims-made policy and an occurrence policy is the way in which they trigger coverage. Occurrence policies cover claims based on when the incident occurred, whereas claims-made policies cover claims based on when they are made, with the need for a retroactive date and tail policy. It is important for policyholders to understand these differences and to carefully consider their coverage needs when selecting a policy.