What’s the Difference Between Claims Occurrence & Claims-Made Insurance?

An insurance policy is, in most cases, valid for 12 months. You may think this means that the period of time is covered completely by that claim, yet this is not always the case, and policies can be written on either a “claims made” or “claims occurring” basis.

It is essential to understand these when thinking of Director’s & Officer’s Liability Policies, but they impact all policy wordings.

What is a ‘Claims Occurring’ Policy?

A ‘claims occurring’ policy wording covers claims that occur during the policy period, irrespective of when the claim is made. So you may have changed insurer, but they will still accept a claim even though the policy has ended.

A good example is Employer’s Liability policies and businesses that had employees exposed to industrial diseases or asbestos many years ago and who have been sick as a result. The Employers Liability insurer at the time these individuals were employed would need to be contacted. 

Sometimes a claim can go back many years, and policy records may no longer exist advising who the insurer was. We keep a record of the employer’s liability insurers for our clients going back decades in case this scenario occurs. 

What is a ‘Claims Made’ Policy?

On the other hand, a ‘claims made’ policy wording covers claims that are made and reported during the policy period only and not once the policy period is over. The previous insurer will no longer accept the claim as you have moved provider.

This is typical of a Professional Indemnity policy – it means all your work is covered as far back as the policy’s start date or the retroactive date as long as the policy continues to be in force. For example, if a company is insured with Insurer 1 from the 1st June 2020 to 31st May 2021, and there is an incident on the 30th of March 2021, then the company no longer requires the cover after the 31st May 2021, and the policy lapses. A claim is presented for the incident on the 30th of March, and as the Insurance policy is no longer in force, there is no cover.

The company needs to continue to cover or source “run-off” cover for a time period whereby the chance a claim could be notified has decreased significantly. 

Professional Indemnity and Director’s & Officer’s Liability Insurance are the most common policies where this situation is discussed. Still, it is important to check every policy as to which basis the wording is written. 

Contact us at 01274 515747 or email us at mail@lwood.co.uk to see how we can support you