Login Join Now

Login

Occurrence versus Claims Made - Part II

Wed, 26 Feb 2014
|
Published in Articles
 

In Part I we defined the “Work Product Exclusion.” In this part we are addressing the differences of the “Occurrence” and “Claims Made” Policies where it relates to construction defect. The insurance industry quickly redefined their policy coverage’s.

Defining”Occurrence” and “Claims Made” where it relates to construction defect has been divided on the issue of whether a contractor’s faulty workmanship fits in the policy definition of “occurrence”.

Some states have held that faulty workmanship or improper construction is not an “occurrence” because it can never be an “accident”. Other states have held that faulty workmanship or improper construction can be an “accident” if the resulting damage occurs without the insured’s expectation or foresight.

Occurrence Based Comprehensive General Liability Policies requires that the “Property Damage” occur during the policy period.

Some courts conclude that the language of the occurrence-based policies distinguish between the causative event, an accident, or continuous or repeated exposure to conditions and the resulting property damage which must occur during the policy period and be the product of an accident or "continuous or repeated exposure to conditions." Where it was alleged was on-going, injuries-in-fact also continue.

Accident Based Policies require that “The Accident” takes place during the policy period and that it is not predicated on “Property Damage.”

Where the injury is caused by gradual and continuous exposure to electrical voltage triggered coverage under a policy covering "sudden and accidental damage" because "sudden and accidental" could reasonably be construed as "sudden and unexpected." Accordingly, these accident based policies were triggered by accidents occurring within the policy period, not limited to a single discrete event. Some courts found the policies embodied an exposure trigger and where alleged migration of toxic wastes continued, multiple exposures triggering coverage also continued.

A CGL policy can be either a "claims" policy or an "occurrence" policy. My understanding of the "claims" policy is that it covers only the 12 month period. The "occurrence" policy covers the occurrence even after the 12 month period. I am trying to understand the types of policies as described by a local agent. I feel we need to understand the true definition in order to make the correct policy purchase.

There are two primary types of insurance policy forms: occurrence and claims-made. Occurrence forms cover losses that happen during a policy period. The loss can be months or years later after the policy period expires. The key is when it first occurred, aka “happened.” Occurrence forms are somewhat more valuable as they respond to claims years later.

A claims-made policy only covers claims made during the policy period. The key is when the claim was first reported to someone who has a relationship to the claim. There are some important endorsements to the claims-made policies that you may need to know, the important ones being extended reporting periods and tail coverage.

The claims-made policy generally costs less than an occurrence policy, because the insured runs the risk of not being covered for a potential claim because it was not discovered until after the policy holder’s policy period expired.

What is tail coverage?

Tail coverage picks up where a claims-made policy leaves off, covering occurrences that happened while the policy was effective, but claimed after the policy expired. As a result, by combining the claims-made policy and tail coverage, it begins to look more like an occurrence policy. There is one major difference. Tail coverage, must be purchased after the claims-made policy expires and it must continue to be paid until the insured determines the risk of discovering an old occurrence is no longer a threat.

Do you have an article to share about this in your state? We would like to share it! Visit us at http://www.claimsresource.com register and upload. Include your logo and we will back link it to your website. Ask us about advertising at This email address is being protected from spambots. You need JavaScript enabled to view it. .

Disclosure: Claims Resources and Solutions LLC claims no authenticity or responsibilities for its accuracy to state laws.

What our Customers are Saying

Connect With Us

Like Us on Facebook
Follow Us on Linked In
Follow Us on Twitter

Disclosure

The use of any material or information on this website is only intended to be used as a resource.

Read More