by Guest » Thu Feb 04, 2010 12:39 pm
I'd mailed my business insurance coverage requirement to an agent. He's come up with 2 types of policies. According to him the "occurrence policy" would offer better coverage than the "claims made" one. But I'm not yet sure of the benefits offered by these 2 policies.
Posted: Thu Feb 04, 2010 01:50 pm Post Subject:
Every policy has a defined policy period in which claims are considered. Most polices we see are occurence based, that is, as long as the loss occured within the policy period then coverage is considered. So when the loss occured is the important part. Claims made policies are usually commercial policies. The date used on these policies are when the claim is made. So the date used is when the claim is _reported_ to the carrier. A claims made policy is very unusual and I've _never_ seen a policy like this. I'm sure there are some good reasons why companies obtain this type of policy but the main one I know of is because this is the type of policy they had before... that way, they have continual coverage.
Keep in mind that the date a loss occurred is view differently from state to state. I have several claims that occurred in CA where the damage sustained by a 3rd party is really outside of the policy period. However, CA law states that each day the damage exists is a new date of loss. So the loss extends over several different policies with several different carriers. This certainly does not hurt the insured. A claims made policy would only look at the date the claim was reported so only one policy would address the loss.
Posted: Thu Feb 04, 2010 05:32 pm Post Subject:
Claims-made contracts are exclusively commercial policies, and they are very common. Tcope- I can't believe that you haven't seen many claims-made contracts. They're ubiquitous in the commercial insurance world.
In an occurrence-based contract, coverage is provided for a covered loss that occurs during the policy period. The claim does not have to be made during the policy period for coverage to apply. There are conditions within the policy that require the claim be reported "as soon as possible" but doesn't require that the claim actually be filed within that policy period.
Claims-made contracts are commercial policies in which the loss must occur during the policy period AND the claim must be reported within the policy period. Since there's a definite possibility that the claim can't be made during the policy period for any number of reasons, claims-made policies have "extended reporting periods," commonly called "tails," in which to report a claim after the end of the policy period and still have the claim covered.
The included tail is referred to as a "basic extended reporting period," or "BERP." The policy automatically includes a "mini-tail" which provides claim-making ability for 60 days after the policy period ends for claims that occurred during the policy period. The policy also includes a "midi-tail" which provides coverage for a claim made for 5 years after expiration as long as the claim was first reported within 60 days after expiration.
The insured can purchase at additional premium a "supplemental extended reporting period," or "SERP" through an endorsement. The SERP tail has unlimited duration and provides new aggregate limits.
I have always preferred occurrence-based contracts, but there's the possibility that you will save a boatload of premium by going with a claims-made contract.
Oh yeah...there's also the "retroactive period" which is another story in claims-made policies!
InsTeacher 8)
Posted: Fri Feb 05, 2010 06:42 am Post Subject:
Hey Teacher..the "mini-tail" that allows you to claim within 60 days ever since your policy period ends is quite clear to me. What I didn't get clearly is the "midi tail". Please see, if you could explain this one with an example.
Posted: Fri Feb 05, 2010 07:42 pm Post Subject:
Hey Teacher..the "mini-tail" that allows you to claim within 60 days ever since your policy period ends is quite clear to me. What I didn't get clearly is the "midi tail". Please see, if you could explain this one with an example.
Since you asked so nicely, I'd be happy to explain the "midi-tail."
The midi-tail goes for 5 years after expiration of the policy. It doesn't allow the insured 5 years to "make a claim" but will actually provide coverage for a period of 5 years after expiration. The coverage will continue for a period of 5 years, but the claim must still be reported within the basic extended reporting period (the BERP). We'll look at a commercial exposure, say a business, and we'll create a loss scenario that brings this into play.
Billy Bob owns a retails store. He has a claim-made policy with the following bodily injury limits: $1,000,000 per occurrence/$2,000,000 aggregate and a policy period of 1/1/2010 - 12/31/2010 and then the policy renews for the next policy period. The policy also contains coverage for "products and completed operations" for product liability concerns.
The occurrence limit within a claims-made policy is the maximum amount the carrier will pay for any one cause of loss during the policy period, and the aggregate amount is the maximum the policy will pay for all losses that occur during the policy period.
Billy Bob's DBA (business name) is "Billy Bob's Billiard Ball and Glass Eye Emporium" and he sells, well, billiard balls and glass eyes. :? He sells a glass eye to Bobby Sue on 6/1/2010. Everything is fine with Bobby Sue's glass eye for a while, then she starts experiencing pain in her glass eye area. She sees a doctor, and the doctor starts performing tests to see what the problem is.
It's determined that the glass eyeball was the cause of her problems and she notifies Billy Bob and his insurer of the problem but doesn't yet make a claim. Now, it's obvious the loss occurred during the policy period, so the first requirement that the loss actually occur during the policy period has been met. In order to "complete" the claim under a claims-made policy, remember that the claim itself has to be made during the policy period. Billy Bob gets a call on 12/31/10 that Bobby Sue is intending to file a claim on January 2, 2011: after the expiration of the policy.
The claim is filed within 60 days of expiration and the requirement that the claim be actually "made" within the 60-day period (the "mini-tail" requirement) has also been met.
Now, in a liability suit, it's highly unlikely that we will have any settlement accepted on the lawsuit within 60 days. The "midi-tail" recognizes the idea that BI lawsuits take, at times, years to settle. The midi-tail extends the actual coverage for 5 years after the expiration of the policy for any claim made within the mini-tail period. So, since the requirements of the midi-tail have been met, coverage will continue to apply for the "eyeball" claim for 5 years after expiration.
The midi-tail will NOT cover a loss that occurs after expiration; it will only provide coverage for losses that happened during the policy period. The tails simply give the insured a longer reporting period to "make" the claim and have it covered under the terms of the (now) expired policy.
The midi-tail stills requires that the loss be reported within 60 days of expiration but simply extends coverage on the reported loss for 5 years after expiration.
Whew...does this make any sense? If not, please let me know!
InsTeacher 8)
Posted: Wed Feb 10, 2010 06:35 am Post Subject:
I have always preferred occurrence-based contracts, but there's the possibility that you will save a boatload of premium by going with a claims-made contract.
I believe the claims made policies would not only offer good coverage, but would also cost lesser for a longer period of time. You'd need to pay 35-50 more in terms of premiums towards an occurrence policy.
Posted: Sat Feb 13, 2010 09:08 am Post Subject:
There are quite a few businesses which require occurrence policies. The risk policies of these businesses ensure that the endorsements concerning their prior acts as well as the tail coverage are in place. You could have a good example of this in the form of Construction companies whose work-related defects are usually uncovered years after.
Posted: Tue Jul 13, 2010 02:32 pm Post Subject: Claims Made VS Occurrence
If you can afford the occurrence policy, don't even look at the claims made coverage....
Posted: Thu May 05, 2011 09:22 am Post Subject:
Business insurance policies are often presented in two forms. One is the claims made policy and the other is the occurrence policy. Before approving to buy business insurance, the business owner should understand the differences between the two types of policies.
Claims Made Policies provide coverage for claims made in the period the policy is in force. Claims made policies provide coverage only so long as the insured continues to pay payments for the initial policy and any following restitution.
Occurrence coverage is insurance that provides coverage for the act when it occurs - regardless of when it is reported. Occurrence coverage is, in my opinion, the better option for the business owner.
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Loss Adjusters UK
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