There are two key features of a claims-made policy.
- Firstly, the policy limits coverage to claims first made during the policy period. A claim is typically “made” on the date that you notify your broker or the Insurer. A claim made before the policy inception date or after the expiration date is not covered unless you have selected an ERP to allow you additional time to report claims after expiration.
- Secondly, a claims-made policy may contain a retroactive date. If a retroactive date is included, no coverage is provided for claims resulting from events that occurred prior to that date. The retroactive date is the earliest date on which causes giving rise to claims may occur and still be covered under the policy. For example suppose you take out a claims made policy on 1 January 2017, and opt for a retroactive date of one year earlier: 1 January 2016. Although your current policy applies for the period 1 January 2017 to 1 January 2018, if on 3 March 2017, you receive a claim for an error which arose on 2 January 2016, you will have cover for the event notified as the cause happened after the retroactive date. If on 3 March 2017, you receive a claim arising from an error which arose 30 December 2015 you will not have cover as the cause happened before the retroactive date.
Retroactive dates can be chosen by the practitioner. The retroactive date will always be set to match your initial date of insurance if you are switching from another claims made policy. If you are switching from an occurrence based policy, no retroactive date is needed.
Claim Reporting Requirements
All claims-made policies stipulate that claims must be made during the policy period, within 30 days of becoming aware of an event or as soon as practicable.
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