Claims-Made and Reported Policies 101

Imagine this: a claim comes in from a client over a mistake made last year…but your new insurance carrier says it isn’t covered. Why? Because of timing. That’s the reality of claims-made and reported policies. They don’t just protect against what happened, they protect based on when it happened and when it’s reported.

Unlike occurrence-based coverage, claims-made and reported policies hinge on two key factors: when the claim is made and when it’s reported to the carrier. Missing either window can mean missing out on coverage altogether.

These policies are common across many professional sectors, including:

• Lawyer’s Professional Liability (Legal Malpractice Insurance)
• Other Professional Liability Coverage
• Employment Practices Liability Insurance (EPLI)
• Cyber Liability Insurance

In this article, we’ll break down the fundamentals of claims-made and reported policies: what they are, how they work, and what questions to ask your insurance agent before securing or renewing your coverage.

The Basics of a Claims-Made and Reported Policy

A claims-made policy requires that coverage be in place at the time a claim is reported and that the claim or incident occurs after the policy’s “retroactive date”.

If an act, error, or omission occurred before the retroactive (or “prior acts”) date, coverage will not apply. This makes it crucial to secure coverage before starting your law practice, opening your business, or engaging in any activity that could lead to a claim.

In short, for a claim to be covered under a claims-made policy, both the timing of the claim and the timing of the incident matter.

Policy Period for a Claims-Made Policy

In a claims-made and reported policy, the policy period refers to the time frame listed on the Declarations Page and includes retroactive coverage back to the prior acts date.

For example, suppose you have a policy in place from January 2023 to January 2024 with a prior acts date of January 2004. Because there has been no break in coverage, and your retroactive date remains intact, your effective coverage period extends from January 2004 through January 2024.

The diagram below illustrates how the policy period works, showing that coverage applies only if an act, error, or omission occurs and is reported to the carrier within that timeframe.

What is a Retroactive Date? Why does it matter?

A retroactive date marks the start date of your first claims-made policy. Any lapse in coverage can jeopardize your prior acts coverage and potentially result in a total loss of protection.

For example, if your first claims-made policy became effective on January 1, 2023, and you maintain continuous coverage, that date will remain your retroactive date.

To preserve your retroactive date going forward, you must either renew your policy or purchase an Extended Reporting Period (ERP) option. Failing to do so creates a gap in coverage, which can cause you to lose prior acts protection entirely.

Extended Reporting Period (ERP) or “Tail” Coverage

An Extended Reporting Period (ERP), often called “tail coverage”, is an endorsement that extends the timeframe for reporting claims under an existing policy.

ERPs are available for various durations, and options can vary by carrier. Typically, carriers offer tail coverage options ranging from 12 months to 5 years. Some even offer an unlimited ERP, which means the coverage remains active until the policy’s limits of liability are exhausted.

There are two key things to know about ERPs:

1. The premium must be paid in full. It cannot be financed through your insurer. If you wish to finance the premium for an ERP, they must do so independently through a third-party lender.
2. The ERP is not renewable. It is a one-time purchase. Once the ERP endorsement expires, no further protection applies to that policy period, and prior acts coverage ceases.

Example:

Suppose you’ve maintained continuous coverage since January 1, 2003. At the time of your renewal on January 1, 2023, you decide to purchase a 5-year ERP option. This endorsement allows you 5 years to report a claim for any incident that occurred between January 1, 2003, and December 31, 2022.

If your limits of liability are exhausted during that five-year period, the ERP endorsement expires immediately, and no further coverage applies.

If the limits are not exhausted by January 1, 2028, the ERP simply expires, with no extensions or reimbursements available.

Cautions When Renewing Coverage, Switching Carriers, or Changing Agents

Whether you are renewing your claims-made policy for the first time or the twentieth, it’s vital to double-check the renewal offer and confirm that your acceptance maintains the coverage you’ve invested in.

If you are considering changing insurance agencies or carriers, take the time to thoroughly review and compare the policies being offered. Key areas to review include:

• Retroactive Date and Prior Acts Coverage Date(s)
• Predecessor Coverages
• Named Insured vs Insured Coverage
• Limit of Liability (amount and type)
• Deductible (amount and type)
• Endorsements applied to the policy – these tailor the policy form and can either enhance or reduce coverage.
• Policy Exclusions, Terms, and Conditions
• Policy Type and Triggers – verify they align with your firm’s needs

It’s ultimately your responsibility to ensure that your policy is renewed accurately. However, working with a reliable and knowledgeable insurance agent can go a long way in helping you navigate these complex forms with confidence.

Wrapping Up

Claims-made and reported policies can feel confusing, but once you understand how timing works, they start to make a lot more sense.

Your coverage needs to be active when a claim is reported, the incident has to happen after the retroactive date, and keeping continuous coverage protects the work you’ve done in the past.

If you switch insurers, make sure your new policy keeps the same retroactive date and similar protections. And if you’re planning to retire or close your practice, look into Extended Reporting Period (“tail”) options so your past work remains covered.

Taking a little extra time to review these details can save you from big headaches later. When you know how your policy responds, you can move forward with confidence—focused on your clients, not your coverage.

More Resources:

eBooks: Professional Liability 101 & An Overview of Legal Malpractice

Calculating Adequate Coverage When It Comes to Limits of Liability

Professional Liability Insurance Scoring Checklist

Insurance Market Cycles Explained: What Soft vs. Hard Markets Mean for Law Firms