What is a claims made policy? A claims made policy provides coverage for claims made during the policy period for covered acts occurring after the policy retroactive date shown in the policy and before the end of the policy period. A policy must be in place at the time of the project and at the time of the claim. The policy that is in force at the time of the claim is the policy that will provide coverage.
The other type of policy is an occurrence policy. For example, your automobile policy is typically on an occurrence policy form. So the day you have the accident is the day the policy will take effect and pay the claim.
The reason for the claims made policy for Design Professionals is because your firm will not have a claim on the day you are designing the project (occurrence policy). The design error or omissions are typically discovered, on average, two to three years after substantial completion of the project. Therefore, because the claim is made at a later date than when the error or omission happened that is the day that the claim will be covered.
The other portion of the claims made policy to be aware of is the retroactive date. Many carriers will offer full prior acts coverage, which provides coverage from the beginning of your firm. Or the policy will state a specific date (1/1/1980), which may also be the beginning of your business. Sometimes if coverage lapses the carrier will offer a policy inception date (5/15/16) and that will be the retroactive date going forward. Be sure you know what your retroactive date is on your firm’s policy.
As always if you ever have any questions your PUI Agent to help you out. Please call or email with questions.