Tag Archives: claims made

CLAIMS MADE INSURANCE POLICIES

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“Claims-made policies are common in the professional liability insurance market. They “differ from traditional ‘occurrence’-based policies primarily based upon the scope of the risk against which they insure.” With claims-made policies, coverage is provided only where the act giving rise to coverage “is discovered and brought to the attention of the insurance company during the period of the policy.” In contrast, coverage is provided under an occurrence-based policy if the act giving rise to coverage “occurred during the period of the policy, regardless of the date a claim is actually made against the insured.”  “The essence, then, of a claims-made policy is notice to the carrier within the policy period.”

Crowely Maritime Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2019 WL 3294003 (11thCir. 2019)

The recent Eleventh Circuit Court of Appeal opinion in Crowely Maritime Corp. discussed the distinction between a claims-made insurance policy and an occurrence-based insurance policy.  Professional liability policies are generally claims-made policies whereas commercial general liability policies are generally occurrence-based policies.  While this opinion does not involve a construction matter, the case did concern the definition of a “claim” in a claims-made policy and whether such claim was timely reported to the insurer within the discovery period / extended reporting period.

The discovery period in a claims-made policy should coincide with an extended reporting period to report a claim, based on how the specific policy defines a claim.  How a policy defines a claim is very important since policies contain different definitions. The discovery period will include language that allows the insured to report a claim that occurred DURING the policy period outside of the policy period within the extended period.  The key is that even with a discovery period, the wrongful act giving rise to the claim must still have occurred during the initial policy period, although it can be reported to the insurer after the initial policy period and within the extended discovery period. If the wrongful act giving rise to the claim occurred AFTER the initial policy period, it will not matter if it was reported within the extended discovery period because the claim, itself, arose outside of the initial policy period.

Insurance is complicated and confusing and everything in between.  Make sure you understand how your policy defines the term claim, whether you are operating under a claims-made or occurrence-based policy, and what constitutes timely notification of a claim, particularly if you are operating under a claims-made policy.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

QUICK NOTE: PRIOR ACTS EXCLUSION IN INSURANCE POLICY

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imagesAs an insured, it is important to understand the prior acts exclusion in your liability insurance policy.  The prior acts exclusion bars coverage for claims that arise out of an act prior to the policy period or specified date in the policy.   Knowing this, an insured typically can get some prior acts coverage to cover claims that arise out of an act that precedes the policy period (e.g., after a retroactive date).  Perhaps it is not full prior acts coverage (covering claims that arise out of acts that occur at any time) but coverage for claims arising out of an act after a retroactive date (date earlier than the policy period).  This becomes important, particularly with claims made policies (such as professional liability policies or directors and officers liability policies) since these policies are triggered by a claim made during the policy period.  With the prior acts exclusion or even with the retroactive date, if the claim arose out an act that pre-dates the policy period or retroactive date, the insurer has an argument that the policy does not cover the claim.

 

A recent decision (discussed here) pertaining to a directors and officers liability policy shows the application of the prior acts exclusion and how courts broadly construe “arising out of” language in the exclusion.  In other words, in the recent decision, even though the claim pertained to a wrongful act that occurred during the policy, the underlying act that made it a wrongful act arose out of acts that occurred prior to the policy period.  Thus, the court broadly construing “arising out of” language, maintained that the prior acts exclusion barred coverage for the directors and officers claim.

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.