Legal Definitions - claims-made policy

A claims-made policy is a type of insurance coverage that provides protection for claims that are first made against the insured and reported to the insurer during the active policy period, or within a specified extended reporting period (often called "tail" coverage). This means that for coverage to apply, the actual claim or lawsuit must be filed and reported while the policy is in force, regardless of when the incident or event that led to the claim originally occurred (as long as the incident was unknown to the insured prior to the policy's start date).

This type of policy differs significantly from an "occurrence policy," which covers incidents that *occur* during the policy period, no matter when the claim is reported.

• Example 1: Medical Malpractice Insurance for a Physician

  Imagine a physician holds a claims-made medical malpractice policy from January 1, 2023, to December 31, 2023. In March 2023, a patient undergoes a procedure performed by this physician. Several months later, in October 2023, the patient discovers a complication and files a lawsuit (makes a claim) against the physician, reporting it to the insurer.

  How it illustrates the term: Because the claim was "made" and reported to the insurer in October 2023, which falls within the active policy period (January 1 - December 31, 2023), the claims-made policy would likely provide coverage for the lawsuit. If the patient had waited until January 2024 to file the claim, and the physician had not renewed the policy or purchased an extended reporting period, the 2023 policy would not cover it, even though the procedure occurred in March 2023.

• Example 2: Directors & Officers (D&O) Liability Insurance for a Company Board

  A company's board of directors is covered by a claims-made D&O policy for the period of July 1, 2022, to June 30, 2023. In September 2022, the board makes a strategic decision that later draws criticism. A shareholder lawsuit alleging mismanagement is officially filed and served on the directors in April 2023.

  How it illustrates the term: The D&O policy would cover the legal defense and potential damages because the claim (the shareholder lawsuit) was "made" and reported to the insurer during the active policy period (April 2023 falls within July 1, 2022 - June 30, 2023). If the lawsuit had been filed in July 2023, after the policy expired and without renewal or extended reporting period, the 2022-2023 policy would not respond, even though the alleged wrongdoing occurred during that policy's term.

• Example 3: Professional Indemnity for an Architectural Firm

  An architectural firm has a claims-made professional indemnity policy for the calendar year 2023. In April 2023, the firm provides design specifications for a new building. Due to a subtle error in the plans, a structural issue arises during construction, but it isn't discovered until November 2023, at which point the client formally notifies the architectural firm of their intent to sue for damages (makes a claim).

  How it illustrates the term: The 2023 claims-made policy would cover this situation because the claim was "made" and reported to the insurer in November 2023, which is within the active policy period. The policy covers the claim because it was reported during the policy term, even though the initial design error occurred earlier in the same policy year. If the client had waited until January 2024 to make the claim, and the firm had not renewed their policy or purchased an extended reporting period, the 2023 policy would not provide coverage.