Robin's Ruminations

My good friend Eric Vennes works at Insurance-Tek.  He was kind enough to write this brief comparison of "claims made" style insurance and "occurrence" style insurance.  His e-mail also said this:

"I would ask that if you do make edits however, that I see them prior to posting on the site to confirm accuracy. Claims-Made vs Occurrence forms is, in my opinion, one of the most confusing issues to verbalize. In my seminars, I actually use illustrations."

Not to worry Eric, I didn't make any changes to the text, just some formatting changes so your material will appear on the web better.

I'll just mention that I've had both claims made and occurrence insurance policies.  Currently I'm carrying an occurrence policy.  Its been years since I last carried a claims made policy and I hope to never carry one again.

Oh, and one other thing, the idea for this post came from Jim Cronin.  He's a WALI member who is based in the Mukilteo area.  Jim has some very nasty habits.  You see (and don't tell anyone I mentioned this) he tends to ask very good questions and he likes to share useful information with the people around him.  ;-)

---

Claims-Made Form v/s Occurrence Form

• Claims Made CG0002
  • Claim reporting is time restricted to the active policy, deductible and terms
  • Claim or knowledge of claim must be reported within the retro-date and the expiration date of the policy.
  • When your policy expires, you must purchase a “tail” to extend the time a claim can be reported.
    • Cost can be 150% to 300% of the expiring premium depending on term purchased. Note most policies will have a limited extended reporting period of 60 days after expiration. Some programs will extend reporting period from 12-24 months after expiration if you retire and have set number of years with same carrier.
  • The policy that expired can be tossed when the renewal takes it place.
  • If policy is not renewed, it can be tossed once the “reporting period” expires.
  • The premium paid means nothing once the reporting period expires.
  • Subject to new terms, deductible, restrictions and exclusions.
  • Easy to get into and expensive to get out of!
• Occurrence Form  CG0001
  • Claim reporting is subject to “reasonable time”
    • Note: some states restrict the time to file a suit like New York. If suit is filed after 12 months of the date of event, the State will not uphold the suit; therefore, your insurance company may defend, but normally to release you from the suit for above conditions.
  • Each occurrence term purchased is kept, as the date of event will apply to the appropriate policy period for the date of loss or event.
  • Policy expires … you do not need to purchase a tail. You can purchase discontinued operations coverage to protect if a date of event occurs after you close your doors. This is rare and it is more likely seen in the construction field.
  • A policy that expires is kept within your insurance records according to your state filing statues.
  • The premium paid means you have the prior terms to present claims against.
  • Each policy’s coverage is subject to its terms, deductible, restrictions and exclusions.
  • Most occurrence polices will not offer “nose” coverage to gap the “prior acts” or to keep your retro-date intact.
    • Some programs will offer “prior acts” coverage or “conversion endorsements” at a price, but typically less than the cost for the “tail” coverage of a “Claims-Made” policy form. Ask your Broker when moving out of Claims-Made and into an Occurrence form.

Comments (0)
Robin Mullins November 21st, 2009 11:09:10 PM

 Comments No Comments Found

 Add a Comment

Subject:     Name: E-mail: Web Site:   Comment:  (No HTML - Links will be converted if prefixed http://)   Remember Me?