One of the first things to look at when evaluating an insurance program for a design professional is whether they are on a claims made or occurrence policy form.
Here’s a brief description of the differences (from a/ePronet):
CLAIMS-MADE vs. OCCURRENCE
Most liability policies are written on an “occurrence” policy form. Occurrence policies need only to be in effect on the date that an accident causing damage occurs in order to trigger coverage. A claim asserted against the insured may be brought well after the accident. Coverage would revert back to the policy that was in effect at the time of the accident. Claims of professional liability against design professionals often result many years after an alleged error is committed making it difficult for insurance companies to evaluate their true exposures and determine the premium necessary to cover the risk. Claims-Made policy forms were introduced whereby the trigger for coverage is the date the claim is made against the insured. Today, virtually all professional liability policies for design professionals are provided on Claims-Made forms.
In order to establish coverage, three conditions must be met:
1) a policy must be in place at the time a claim is made and; 2) a “retroactive” or “prior acts” date on the policy must be dated at least as far back as the services, giving rise to the claim, were provided; and 3.) Notice in the appropriate from must be provided to the insurer within the policy term or during a grace period that might be thirty or sixty days after coverage termination.
The advice of your insurance advisor is essential when reviewing Claims-Made policies with respect to mergers, acquisitions, splits and retirement.
PDI is an Indianapolis-based wholesale brokerage firm with a national network that includes thousands of insurance agents, brokers, architects, engineers and contractors in all 50 states. Since PDI’s beginning in 1980, we’ve handled a single line of coverage: errors & omissions (E&O) for design professionals.