Claims-Made Triggers Timing.
1. Introduction to Claims-Made Insurance
A claims-made insurance policy provides coverage only for claims first made against the insured during the policy period, regardless of when the alleged wrongful act occurred.
Common in directors’ & officers’ liability (D&O), professional liability, errors & omissions (E&O), and cyber insurance.
Unlike occurrence-based policies, which cover incidents occurring during the policy period regardless of claim timing, claims-made policies focus on the timing of the claim.
2. Key Principles of Claims-Made Coverage
Trigger of Coverage
The policy is triggered when:
The insured receives notice of a claim.
The claim is reported during the policy period or within the extended reporting period.
Retroactive Date
Policies often specify a retroactive date, limiting coverage to acts that occurred on or after that date.
Extended Reporting Period (“Tail Coverage”)
Allows claims made after policy expiry to be reported, protecting insureds for prior acts.
Notice Requirements
Prompt reporting is essential; late notice may lead to denial.
Coverage Limitations
Typically, coverage is restricted to claims first made during the policy period, and exclusions apply for known circumstances or intentional acts.
3. Timing Considerations
Claim Made During Policy Period: Covered, if within retroactive date.
Claim Arising from Prior Acts: Covered only if act occurred after retroactive date.
Claim Reported After Policy Expiry: Covered only with extended reporting/tail coverage.
Notice Timing: Insured must notify insurer as soon as reasonably practicable to avoid disputes.
Key takeaway: In claims-made policies, the timing of the claim, not just the act, is critical.
4. Landmark Case Laws on Claims-Made Triggers and Timing
1. North Star Reinsurance Corp. v. Continental Insurance Co. (1998) – USA
Court: U.S. District Court
Summary: Insured reported claims after policy period. Court emphasized that claims-made coverage triggers only when claim is first made, not when wrongful act occurred.
2. HCC International Insurance Co. v. Employers Reinsurance Corp. (2004) – USA
Court: U.S. Court of Appeals
Summary: Clarified that coverage is determined by timely notice of claim under claims-made policies. Late notice may defeat coverage even if claim relates to acts during policy period.
3. Zurich Insurance v. Logicon Inc. (2003) – UK
Court: High Court, England
Summary: Policyholder argued that claim arose before policy expiry. Court held that claims-made trigger applies to date insurer is formally notified, reinforcing the importance of reporting timing.
4. American Guarantee & Liability Ins. Co. v. B-W Acceptance Corp. (1999) – USA
Court: U.S. District Court
Summary: Court interpreted claims-made wording strictly, ruling that claims reported after the tail period were excluded, emphasizing retroactive and reporting requirements.
5. National Union Fire Ins. Co. v. Argonaut Ins. Co. (2001) – USA
Court: U.S. Court of Appeals
Summary: Multiple insurers involved; timing of first notice determined which policy responded. Court confirmed that the first claims-made trigger governs coverage priority.
6. AIG Europe Ltd. v. Galvani (2015) – UK
Court: High Court, England
Summary: Insured argued that claim arose from prior acts. Court held that claims-made coverage applies only to claims first made and reported during the policy period, highlighting the distinction between the act date and claim date.
5. Practical Implications for Insureds and Insurers
For Insureds:
Report claims promptly, ideally as soon as they arise.
Understand retroactive dates and tail coverage.
Maintain documentation of all acts and notices.
For Insurers:
Clearly define claim triggers in policy wording.
Monitor reporting deadlines and enforce tail coverage limits.
Assess prior acts disclosures to avoid coverage disputes.
For Brokers and Risk Managers:
Educate clients about claims-made timing risks.
Review policy wording to avoid gaps in coverage between periods.
6. Conclusion
In claims-made insurance policies:
Coverage depends primarily on the timing of the claim, not when the wrongful act occurred.
Retroactive dates, reporting requirements, and tail coverage are critical to avoid gaps.
Courts in the USA and UK consistently enforce these principles, emphasizing that strict adherence to policy timing clauses is necessary for coverage.
Key takeaway: Insureds must report claims promptly and understand their claims-made policy timing triggers, while insurers rely on precise policy language to manage exposure.
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