How Does Claims-Made Coverage Work?
What Does Claims-Made Coverage Mean?
Claims-made coverage generally focuses on when a claim is first made against the insured and when it is reported to the insurance company, rather than relying only on the date the underlying work was performed.
Date of the Professional Service
The work or service that led to the allegation may have been completed months or even years before the claim is actually made.
Date the Claim Is Made
The policy may require the claim to first be made during the active policy period or another qualifying reporting period.
Date the Claim Is Reported
Reporting requirements can be critical. Some policies require claims or potential claims to be reported within specific timeframes.
Why Does the Retroactive Date Matter?
Many claims-made policies include a retroactive date. Professional services performed before that date may not qualify for coverage even if the claim itself is made while the current policy is active.
This date may establish how far back qualifying professional services can occur for purposes of the claims-made policy.
Allowing a claims-made policy to lapse can create problems for claims that surface later, even when the professional work occurred during an earlier policy period.
Some policies may provide prior-acts coverage for qualifying work performed before the current policy began, subject to the retroactive date and other conditions.
Claims or circumstances known before a new policy begins may be subject to exclusions, application representations, or other restrictions.
What Happens If the Policy Ends Before the Claim Arrives?
When a claims-made policy is canceled, replaced, or allowed to expire, businesses should review how future claims involving prior work will be handled.
Follow the policy’s notice requirements when a demand, lawsuit, allegation, or other qualifying claim is received.
Some policies allow or require notice of circumstances that could reasonably develop into a future claim.
An extended reporting period, sometimes called tail coverage, may provide additional time to report qualifying claims after a claims-made policy ends, subject to the policy terms.
When changing insurers, compare retroactive dates, prior-acts protection, pending matters, and continuity before the old policy expires.
Do You Know Your Professional Liability Retroactive Date?
Best Formula Insurance can help businesses review Professional Liability policy structure, claims-made coverage, retroactive dates, prior acts, reporting requirements, policy continuity, and extended reporting options.