Claims-Made Policy

A claims-made policy is a type of insurance policy that provides coverage for claims that are both made against the insured and reported to the insurer during the policy period. This is different from an “occurrence” policy, which covers claims arising from events that occurred during the policy period, regardless of when the claim is made.

Here’s a breakdown of claims-made policies

• Timing is Key: The key feature of a claims-made policy is the timing of both the claim being made and it being reported to the insurer. Both must happen within the policy period for coverage to apply.
• Retroactive Date: Claims-made policies often have a retroactive date, which is a specific date in the past before which any claims will not be covered, even if they are made and reported during the policy period.
• Extended Reporting Period: Policyholders can often purchase an extended reporting period (ERP), also known as “tail coverage,” which allows them to report claims after the policy has expired, as long as the incident occurred during the policy period.
• Common Uses: Claims-made policies are frequently used for professional liability insurance, such as for doctors, lawyers, and consultants, where claims may arise years after the service was provided.

Example

A doctor has a claims-made policy with a policy period from January 1, 2024, to December 31, 2024. A patient makes a claim against the doctor on November 15, 2024, for an incident that occurred on June 1, 2024. The claim is reported to the insurer on December 1, 2024. This claim would be covered because it was both made and reported within the policy period.

Claims-made policies can be more complex than occurrence policies, so it’s important to understand the specific terms and conditions, including the retroactive date and the availability of an extended reporting period. They are often favored by insurers for certain types of risks, as they provide more certainty about the potential for claims and allow for better control over liability exposure.