Occurrence v. Claims Made

People often seem confused by the terms occurrence policy and claims made policy. What is covered when?

Lets start with an example of what is not covered, ever. On a Google group, I read this post. (You may have to scroll down to the bottom to see it.) The author suggets pulling a "fast one" on the insurance company to get coverage in a situation. You cannot "pull a fast one". The insurance company will catch you. In California, you could be facing a felony with a substantial fine and jail time. Dont do it!

Now, back to our topic. An occurrence policy pays for claims that occur or happen during the time the policy is in effect. A claims made policy pays for claim that are made during a policy period.

Example A: Policy is in effect from 1/1/05 to 1/1/06. You injure someone on 6/1/05. The claim is made on 2/1/06. This occurred during the policy period, and an occurrence policy would cover you. However, a claims made policy would not cover you since the claim was made after the policy expired.

Example B: Policy is in effect from 1/1/05 to 1/1/06. You injured someone on 10/31/04. Claim is made on 2/1/05. The injury occurred before the policy period, so an occurrence policy would not cover you. However, a claims made policy would since the claim was made during the policy period.

I am sure this is clear as mud. Most policies are occurrence policies. If you have an errors and omissions (commonly called malpractice) policy, you may have a claims made policy. Contractors also have claims made policies quite often. Read your policy, ask your agent what type you have, and make sure you know. The difference between a covered claim and an uncovered claim could result in your bankruptcy.

Comments

[George Holmes]

On an occurrence form, when does an occurrence occur for Completed Operations purposes? Does it occur when the mistake is made, or when the event which causes BI or PD occurs? Why?