If you own a business or are considering purchasing a Commercial General Liability (CGL) policy, it is essential to understand how claims are paid in the event of an accident. There are two primary ways these policies respond to claims: Occurrence and Claims-Made. In most cases, the insurance company determines which type applies based on the level of risk they are assuming.
An Occurrence policy covers claims for injuries or damages that occurred during the active policy period, regardless of when the claim is filed. The key factor is the date of the accident, not the date the claim is reported.
For example, if a customer is injured at your business on March 10, 2017, and files a lawsuit in May 2019, the policy that was active in March 2017 will respond to the claim, even if you no longer carry that policy. This type of coverage offers long-term protection, since claims can be paid years after the policy has expired.
A Claims-Made policy, on the other hand, only covers claims that are reported while the policy is active, regardless of when the accident occurred. These policies include a retroactive date, meaning only accidents that occur on or after that date are eligible for coverage.
Using the same supermarket example, if the accident occurred in March 2017 but the claim was filed in May 2019, the policy will only pay if the business had an active Claims-Made policy in 2019 and the retroactive date applies. If the policy was no longer active, the business owner would be responsible for the claim unless an Extended Reporting Period endorsement, often called Tail Coverage, was purchased. This endorsement allows claims to be reported after the policy has expired.
Understanding the difference between Occurrence and Claims-Made coverage is crucial when purchasing commercial insurance. Choosing the wrong option can leave your business exposed to costly claims in the future. At Calidad Insurance, we help you select the right coverage so you can operate your business with confidence and peace of mind.
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