Occurence vs Claims Made
Whenever you have a loss, there are two important dates. The date the loss occurred and the date you filed the claim. In some cases like car accidents, we immediately know there is an issue and will file a claim right away.
However, there are some times when an issue happens, but we don’t know about it right away. This is normally with professionals. Like a doctor performing a surgery, and a year later a complication happens because the doctor did a bad job with the surgery, maybe he left some gauze in the body. The time the incident occurred was a long time ago, but the problem didn’t appear till much later.
Occurence vs Claims: What is the difference?
Occurrence: The policy that was active during the occurrence is the one that pays.
Claims Made: The policy that was active when the claim was filed is the one that will pay.
An Example
In business insurance, a policy can cover a person/business in two ways, Occurence or Claims made. Each one is based on the type of coverage needed.
Imagine I am an insurance agent working in an office. I need two types of insurance. One that will cover my building and one that will cover me and if I make a mistake in the paperwork.
For my building, I will have an occurrence policy, and for me as a professional, for my Errors and Omissions, I will have a claims made policy.
It’s 2017 and I have my occurrence policy with Travelers Insurance and I have my Errors and Omissions policy with Nationwide.
In 2017, one day a customer is walking up the steps in my office, trips, falls and hurts her back. However, she doesn’t do anything about it and I don’t know I have a potential claim on my hands.
In that same year, I, as an agent, mistakenly removed coverage from a person’s policy and did not realize it, and thus did not fix it, it remains an error.
At the start of 2018, I decided to switch up my coverage for a cheaper premium and now I have my building covered thru Progressive and my errors and emissions policy is with Insureon.
As the year goes on, I am hit with bad news. The woman who fell on my stairs, her back pain is worsening and she decides to sue. She files the claim against me and tells me it occured back in 2017.
Since I have an Occurrence Form policy, I go back to the insurance company I had at the time she slipped, Travelers and they will pay her out for her injuries because they occurred when they were my carrier.
A month later, the mistake I made in removing coverage from a customer’s policy last year was revealed, and I have to submit a claim to my Errors and Omissions to fix the issue. Since this is a claims made policy, the carrier I have NOW when the claim is made will pay, meaning my new carrier, Insureon is going to pay this claim.
An important note about claims made is they do have cut off times. There is a retro-active date, which says how far back in time I can go and be covered. There is also an extended reporting date which allows me to be covered even after I retire, just in case anything else pops up.
Recommended: Gold
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