Claims Made vs Occurrence – Claims Triggers
Attorney Malpractice Insurance and Accountant Malpractice Insurance are written on a claims-made policy form. So when should a claim be reported and to which insurance carrier on a claims-made policy.
The liability portion of your Business Owners and Workers Compensation policies are written on an occurrence policy form. Again the question arises as to when to report a claim and to whom. The 1st time purchaser of a claims-made professional liability insurance policy can be very confused as the why an occurrence policy form is not used for Attorney Malpractice and Accountant Errors & Omissions Insurance.
Occurrence policy form problems with professional liability insurance
In general, if you had an occurrence Attorney or Accountant Malpractice policy and an error or act was alleged to have occurred you would report the claim to the carrier that was on the risk at the time the act or error occurred. This is a simple concept, which unfortunately in the real world can be a very complex answer. If the case being handled, or the professional services being provided spanned a number of years, over many different policy periods, with different insurers and still more policy forms, which insurer is responsible and under with policy form?
Depending how you answer this question and under which theory is utilized, you will have very dramatically different answers. This uncertainty of coverage under an occurrence based policy is not acceptable to law firms and accounting firms where a life’s worth of assets might be at risk. Also, the last thing that a insurer wants is an uncertain outcome that is not predictable.
Claims-Made coverage form under a professional liability Insurance policy
With a claims-made policy, the major issues are resolved. This is one reason that the claims-made form came into existence. With claims-made coverage the four questions you need to answer to determine if there is coverage are:
1. Is Claims-Made Malpractice coverage currently inforce?
2. What was the date that the act or error was alleged to have occurred?
3. What is the retroactive (prior acts) date on the current inforce policy?
4. What was the date that the claim was made?
If claims-made malpractice coverage is inforce, the act was alleged to have occurred after the prior acts date on the policy, and the claim was made during the current policy period then you know which policy form and insurer is on the risk. The claim is settled using the policy form and coverages that are currently inforce at the time the claim was made (Hence the naming of the claims-made policy form).
If you cannot answer in the affirmative to the above 4 questions, barring an ERP (Tail or Extended Reporting Period Endorsement), generally there is no coverage.
This makes the Professional Liability Insurance coverage predictable to the insured and the insurer at the time a claim is made.
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Lee Norcross, MBA, CPCU
California License # 0D87292
L Squared Insurance Agency, LLC ® DBA in California as L2 L Squared Insurance Agency, License # 0L93416
Managing Director, CEO
Lee@L2Ins.com
616-726-7080
