18
Nov
2009
Claims-Made Policies vs. Occurrence Policies
As we speak across California at various offices and local REALTOR® Associations, it has come to our attention that there is great confusion about differences between policies with an occurrence-based claim trigger and those with a claims-made claim trigger. Nearly all property, general liability, auto or workers’ compensation policies are written on an occurrence basis, while the vast majority of errors & omissions (E&O), directors & officers liability and employment practices liability policies are written on a claims-made coverage form.
With an occurrence policy, the policy in effect at the time of the accident or injury (or the occurrence), is the policy that will pay the claim.
Example: A REALTOR® purchases a workers’ compensation policy on May 1, 2008 (Policy A). One of the REALTOR’S® employees falls in the parking lot on the way home on Friday, April 30, 2009. The injured employee reports the injury to their broker on Monday, May 3, 2009. The workers’ compensation just happened to renew on May 1, 2009 (Policy B).
Question: Which policy will pay the claim? Answer: Policy A, the policy in effect when the injury occurred.
With a claims made policy, the policy in effect at the time of the claim is the policy that will pay the claim.
Example: A Broker purchases their first E&O policy on March 1, 2008 (Policy A). On November 20, 2008, one of the Broker’s agents sells a home. On March 1, 2009, the Broker renews their E&O policy (Policy B). On May 15, 2009, the Broker receives a lawsuit that alleges “failure to disclose” issues related to the home sold in November, 2008.
Question: Which policy will pay for the claim? Answer: Policy B, the policy in force when the claim was made.
Stay tuned……we’ll be providing more information about these differences in the future!