Difference between Claims Made and Occurrence Coverage

We are often asked the question, “What is the difference between ‘Claims Made’ and a ‘Claims Occurring’?” when it comes to the types of liability coverage available in the market.

It is important to understand both types of cover to ensure you have the correct cover in place should a claim happen.

Claims Occurring

The simplest basis of liability cover is on a claims occurring basis, it protects you from any covered incident that occurs during the period of cover, regardless of when the claim is reported even if it is after the cover has lapsed or cancelled.

The usual general liability covers such as employers’ liability, public liability and product liability are normally on a claims occurring basis. If you are a Member of AIM, all these covers will be on a claims occurring basis.

Claims Made

Claims made coverage is slightly more complicated. It provides coverage for incidents that occur during the period of cover only if the claim is also made during the period of cover. As long as you continue to renew with the same provider the coverage will continue, once the cover is lapsed or cancelled the cover stops. However, this presents a problem to those who switch from a claims-made basis to an occurrence basis, or who stop buying coverage altogether.

Fortunately, most claims made covers provide coverage to claims that arise from events that take place on or after a specified date, called the retroactive date.

The retroactive date is extremely important for a claims made cover, and this is usually the date at which cover was first incepted. At each renewal the same retroactive date is carried forward.  If you decide to move providers you must make the new provider aware of the retroactive date and the new provider should carry forward the retroactive date from the previous cover and not use the first day of the new cover as the retroactive date. If the retroactive date goes back a number of years this will probably incur an additional cost with the new provider. Otherwise liability arising from activities prior to inception of the new cover would not be covered by the new provider.

It is important to note that a claims made cover can sometimes pay out in relation to claims made after the end of the period of cover – but only if your provider has accepted a valid notification of circumstances during the cover period.

We would recommend to all of our members when moving from a provider who deals on a claims made basis to one on a claims occurring basis that members send the previous provider a copy of their accident book. This ensures that you have made the provider aware of all circumstances known to you before lapsing the cover with them.

Should you be cancelling the cover as you are no longer operational consideration should be given to the purchase of ‘run off’ cover. This will cover claims after the lapsing or cancelling arising from activities occurring prior to lapsing or cancelling.

Examples of covers normally on a claims made basis are Professional Indemnity and Abuse. If you are a Member of AIM these covers will be on a claims made basis.

We hope you found the explanation useful, should you need any further information or wish to discuss the matter further please contact us on 01892 888423.