When it comes to placing liability insurance, understanding the claims trigger is just as crucial as the limit and the premium, especially in sectors where the risks don’t always present themselves straight away.
We’ve all heard the stories:
- A secondary individual contracts asbestosis or mesothelioma 15 years after their spouse has retired from working with asbestos.
- A pollution issue emerges from historic operations.
- A client is sued over a product that was manufactured/supplied a decade ago.
These are latent risks, and it is here that the distinction between claims made and occurrence-based policies matters.
What’s the Difference?
Claims Made covers claims notified during the policy period, regardless of when the incident occurred (as long as it’s after the retroactive date*).
Losses Occurring During covers incidents that occur during the policy period, even if the claim is made years later.
It may sound straightforward, but the consequences of getting this wrong can be significant.
*Retroactive Dates – Brokers Beware
Most policies written on a claims made basis will attract a retroactive date, but not all claims made wordings are the same.
Watch out for these common pitfalls in claims made cover:
- Claims made during the period of insurance stated in the schedule for incidents occurring prior to the retroactive date may not be covered
- Claims made and incidents occurring during the period of insurance stated in the schedule, but for work carried out or products supplied prior to the retroactive date, may not be covered
- Policies which switch from claims made to losses occurring during at any time
Be vigilant — these scenarios could lead to claims not being met by insurers due to gaps in cover and may expose your E&O policy
Where Do Latent Risks Arise?
Some of the most common long-tail exposures include:
- Secondary disease, e.g. from asbestos fibres
- Pollution or environmental contamination
- Products containing synthetic chemical compounds
These issues may not manifest until many years after the exposure, making the policy trigger critical.
The Broker Risk: Gaps in Cover and Reputational Damage
Suppose a broker arranges a claims made policy for a client who has previously had a losses occurring during policy or a claims made policy with differing retroactive dates for certain exposures or, more complicated still, a policy written on a claims made basis with different retroactive dates due to increased limits purchased over time. In such cases, there may be no protection when a claim is made years later.
When a claim lands, brokers are often the first people clients turn to with questions. Clarity up front can prevent difficult conversations later.
What Brokers Should Watch For
Understand the trigger: Never assume – always confirm whether the policy is claims made or occurrence-based
Map the exposure: Understand your client’s historic operations and retained risk
Review retroactive dates: These define how far back the cover will go under a claims made policy and the limit that may apply
Discuss run-off cover: Particularly important when businesses are purchased, close or change structure
Highlight trade-specific risks: Certain sectors have more pronounced long-tail exposures – construction, engineering, manufacturing, demolition and more. These may have attracted a claims made policy in previous years
How Gem Underwriting Can Help
At Gem Underwriting, we’re used to dealing with liability in trades where latent risks are a reality. We’re here to help you understand previous policy coverage, explain long-tail exposures to your clients, and ensure you’re placing cover that does not leave your client exposed and you open to an E&O claim!
We know it’s not always straightforward, and we’ll work with you to make sure there are no surprises when it matters most.