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CSWA-sponsored
Professional Liability Insurance
Occurrence vs. Claims-Made
Q: What type of policy is the new CSWA-sponsored Professional Liability
Insurance?
A: The Professional Liability coverage available with Philadelphia Indemnity Insurance Company
through CPA & Associates is an occurrence policy. The old policy was a claims-made policy.
Q: What’s the difference?
A: The difference is when claims are covered by the policy.
An occurrence policy covers those claims that result from service rendered while the policy was in-force, regardless of when the actual claim is reported.A claims-made policy covers claims that happened and are reported during a covered period of time.
Q: What happens if I switch from a claims-made policy to an occurrence policy?
A: Any claims that come in from service provided prior to the date the occurrence policy became
effective will not be covered. Thus to protect yourself from claims that may arise from previously rendered services that are reported after your old claims-made policy ends and after the occurrence policy begins, you need to purchase an extended reporting period – or tail coverage. Occurrence policies do not cover prior acts nor do they offer an option to purchase coverage to protect prior acts.
Q: What happens if I switch from one occurrence policy to another occurrence policy?
A: Nothing. Because of the nature of occurrence policies, there is no gap in coverage if the policy
periods are contiguous. Claims that may arise after the first policy ends will still be covered by
that first policy since when a claim is reported does not impact a claim being covered under
occurrence policies.
Q: Does an occurrence policy have any advantages over claims-made policy?
A: Yes, since claims generally do not occur the same year the service is provided, you are protected
into the future as long as the policy was in effect on the date the incident or service in question occurred. The policy does not have to be in effect when you are notified of the claim. Thus, you can retire happily and not worry about needing additional protection. With a claims-made policy, you would need to purchase tail coverage if you wish to be protected from claims arising after your policy expired for incidents occurring before that time.
Q: Why does it take so long for claims to be reported?
A: Claims generally are made years later – allegations such as failure to diagnose may not be discovered
for several years. Trends indicate that for any given year of service, an average of …
40% of total claims will be reported in the first year
an additional 30% in the second year
an additional 15% in the third year
an additional 10% in the fourth year
