Coverage Corner

CLAIMS MADE POLICIES – A DEEPER DIVE

By Cathy Trischan

In the March 2025 edition of Primary Agent, you learned that Claims Made policies can be as easy as 1,2,3. [To read the article, click here.] That article outlined a three-step process to determine whether coverage has been triggered and introduced important concepts such as retroactive date and extended reporting period. This month, we take a deeper dive into some additional Claims Made policy issues.

PRIOR AND PENDING LITIGATION (PPL) DATE

While a retroactive date puts a starting point on when a covered act must take place, the PPL date puts a starting point on litigation. Although these are often the same date, they have different purposes. Even if a policy has full prior acts coverage, it will include a PPL date which is typically the effective date of the first policy written. The PPL date is to ensure that a policy is not brought into claims that began prior to the PPL date, and it is important that the PPL date not be advanced when coverage is renewed or replaced.

Consider this example:

Seaside Condo Association purchased a Directors and Officers Liability (D&O) policy effective 1/1/2025 with full prior acts coverage and a PPL date of 1/1/2025. A claim was made against Seaside in December 2024; there is, of course, no coverage for this claim because it was first made prior to the effective date. In February 2025, individual officers were added to the complaint. There is no coverage for the claims against the officers because those claims are part of the litigation that began prior to the PPL date.

WHAT IS A CLAIM?

Claims Made coverage is triggered when a claim is first made against an insured. It is important that insureds understand that a claim is not always a summons and complaint and can be, for example:

▲ A written demand for monetary relief

▲ A written demand for nonmonetary or injunctive relief

▲ Arbitration, mediation, or similar alternative dispute resolution proceedings

▲ Administrative or regulatory proceedings (e.g., EEOC proceeding)

Many policies also give the insured the ability to report incidents that could give rise to a claim. If a claim is made at some point in the future, it will be considered as having been made during the term when the incident was reported. This feature can benefit an insured, especially if policy renewals are likely to include higher retentions or additional exclusions.

CLAIMS MADE AND REPORTED POLICIES

Many policies require that the claim first be made against the insured and reported to the insurer during the policy period. These are called Claims Made and Reported policies, and they are quite common. It is important that the insured understands the importance of reporting claims as soon as they are received, especially with this type of policy.

Some policies include a short period of time after expiration when claims can be reported. With the language below, the insured has 30 days after expiration to report claims. Having this type of claims reporting window is especially helpful when a claim is made against the insured late in the policy term, giving the insured little time to report the claim to the insurer.

Sample Language:

If a Claim is made against any Insured, the Insured shall give written notice thereof to the Underwriter as soon as practicable and in no event later than thirty (30) days after the expiration of the Policy Period….

It is important to carefully review the language in any claims reporting window. Some, as seen below, do not apply if coverage has been renewed.

Sample Language:

If we or the named insured shall cancel or elect not to renew this policy, you shall have the right following the effective date of such cancellation or nonrenewal to a period of sixty (60) days in which to give written notice to us of claims first made against you prior to the end of the policy period….

THE IMPORTANCE OF THE APPLICATION

Applications for many policies written on a Claims Made basis, such as D&O and Professional Liability, are incorporated into the policy and are considered warranties. While it is always important for insureds to complete applications truthfully, it is even more important with these applications. If the insured misrepresents anything on the application, coverage will be void for some or all of the insureds. It is a good idea for the insured, and not the agent, to complete the application to increase the likelihood that all responses are accurate and complete.

Armed with knowledge of the 1,2,3s of Claims Made policies and these additional concepts, you are now ready to confidently discuss Claims Made coverage with your clients.

‘Til next time

Cathy Trischan, CPCU, CRM, CIC, ARM, AU, AAI, CRIS, MLIS, TRIP is IA&B’s commercial lines education consultant. She works with our CIC and CISR programs, as well as our live CE webinars. Catch her at one of our upcoming courses: IABforME.com/education