Coverage Triggers: Claims Made Liability Coverage vs. Occurrence

Dealing with a claim is never fun. When claims arise on past incidents, a lot of time can be spent on gathering and reviewing old notes and files. From there you must determine where a claim should be reported, if you have multiple brokers this can get pretty tricky. At Worthy, we do try to assist as much as possible to make the process easy for our clients to understand and follow.  We find that one of the most challenging aspects to grasp is determining which policy year a claim should fall under.  If the event itself took place over a year ago, where do I report this too? The carrier that was in place when the event occurred or the carrier, I have in place now? 

The answer to that question comes down to what coverage form you have. Below we have broken down the difference between claims made and occurrence coverage, which are key factors in determining what policy you should report a claim to. 

Let’s take a look at the difference between a Claims Made policy form and an Occurrence policy form.  

Occurrence Form: Coverage is triggered regardless of when a claim is made, if the incident occurred during the policy period.  

Claims Made Form: Coverage is triggered when a claim is reported during the policy period, supposing that the circumstances of the claim occurred after the pending prior or retroactive date.  

Still unsure about what the distinction is? Here are some examples of each coverage trigger. 

Occurrence Form: Back in September of 2020, I fell down the back steps of my office building. When I hit the ground, I had gruesome scrapes leading from my knee to my foot. However, aside from a little blood, I was ok, and I chose not to report the injury to my supervisor or to our worker’s compensation policy. (All accidents and near misses should be reported to your Workers Compensation as soon as they occur, we will share the reasoning behind that in another post).  

Now, let’s suppose we get to September of 2021, and I’ve recently discovered there was additional internal injury to my knee and filed for arbitration with the worker’s compensation commission to have my medical fees covered. My employer now needs to report this to their worker’s compensation carrier, but does this fall on the policy that was in place when the injury occurred in 2020 or the policy that is in place when I file my arbitration notice?  

All worker’s compensation policies are written on an occurrence form, so because this injury occurred in September of 2020, it should be reported under the policy was in place at that time of the incident.  

Claims Made Form: Previous to my joining Worthy, I was in leadership at a company where my job responsibilities included creating schedules for our employees. While working at this company, one of my team members tripped over a small box and fell extremely hard on her knee. This resulted in a severe injury and a worker’s compensation claim was filed to cover her injuries and the time she missed from work due to that injury.  

Shortly after this injury occurred, while she was still away from work, this employee had some additional and unrelated health concerns, and I was told to stop scheduling her while she took time off for treatment. I was informed that the employee would contact us when she was ready to come back to work. I didn’t hear anything from her, so I did not schedule her since I knew the severity of the health concerns and was told she would reach out to us. Almost a year later, we were informed that this employee had filed a complaint, claiming we had violated the Worker’s Compensation Act, alleging she wasn’t ever scheduled because we were retaliating against her for seeking workers compensation coverage for her injury.  

So where does should this be reported? The policy that was in place when the fall occurred or the policy that was in place when the suit was received? 

A violation of the worker’s compensation act would be reported on an Employment Practices Liability, or EPLI, policy. Most EPLI policies are Claims Made policy forms. Supposing this was a Claims Made policy and no notice of potential claim (more on this later) was made, this should be reported on the policy that was in place when the suit was received.  

Claims Made Policies and Notice of Potential Claims: In most claims made policies, there is a provision for reporting notices of potential claims. This means that you don’t have to wait until someone files a claim to put the carrier on notice! If you have a Claims Made policy and are aware of a situation that may turn into a claim, or someone threatens to file a suit against you, you can often put your carrier on notice and trigger coverage at the time they are made aware of the circumstances. 

For instance, in my earlier claims made example, let’s suppose that this was a disgruntled employee who, when she stopped being placed on the schedule, informed her supervisor she was going to sue the company for violating her rights as an injured employee. Supposing that the employer has language in their policy that allows for notice of potential claims, they are able to advise their carrier that an incident has occurred that could potentially lead to a claim. It could take a year for this employee to find an attorney, gather supporting paperwork and bring a formal suit against their former employer. Because the employer put the carrier on notice of a potential claim, coverage would be triggered when the carrier first became aware of the incident, not when the actual claim came in.  

Claims made and Occurrence forms can be complex, and each policy has its own provisions and requirements. If you would like more information on Claims Made and Occurrence coverage triggers or would like to find out more about which types of policy forms you have, contact your insurance agent today.