A liability policy covering all claims first notified during the policy year or any applicable extended reporting period regardless of when the injury or loss occurred. However, if the policy has a retroactive date the policy will not respond to events occurring before that date. Unlike the lossesoccurring policies, the policy ‘runs off’ at the end of the extended reporting period. See CLAIMS-MADE REINSURANCE; LIABILITY SEQUENCE.
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Often a form of general or professional liability, there are two basic types of claims-made policy forms:Claims-Made and Reported FormLosses under this form are covered only if the incidence giving rise to the claim takes place and is reported during the policy period. If a claims-made policy is not renewed, an optional Extended Reporting Period (ERP) also known as a “tail” may be purchased. For a claim to be covered, it must occur and be reported either during the policy period or during the Extended Reporting Period.
Pure Claims-Made Form
Just as in the “claims-made and reported form” the claim must take place during the policy period or the extended reporting period. However, the reporting of the claim to the insurance company must be made “promptly” or “as soon as practical.” The key is to know what “triggers” a claim.
For example, suppose an employer receives a notice from the EEOC regarding an administrative hearing concerning employee discrimination and does not report it to the insurance company because there is no actual claim for damages or litigation. The employer has insurance coverage on a claims-made basis with a 60day ERP. Seventy-five days after the expiration of the policy the employer is sued for discrimination. There is no coverage under either a claims-made and extended reporting form or a pure claims-made form. The incident that “triggered” the claim took place when the notice was received from the EEOC had to be reported before the end of the 60-day ERP. (See Nose; Tail).