Claims-made policies (standard for architects and engineers) cover incidents reported while the policy is active, requiring continuous coverage and often “tail coverage” (extended reporting period, ERP) upon retirement or closure of the business. The policy that is in place when the claim is made is the policy that will respond to the claim.
Occurrence policies cover incidents occurring during the policy period, regardless of when claims are filed. Claims-made is generally cheaper initially but poses higher risk if lapsed. The occurrence policy is not common for an architect and engineers’ professional liability. The occurrence policy is common for general contractors on general liability.
Key Differences for Architects and Engineers:
- Claims-Made Policy: Triggered by when a claim is filed against the professional, provided the incident occurred after a designated retroactive date.
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- Usage: Standard for professional liability/errors & omissions (E&O).
- Example: A designer makes a structural error in 2024. The lawsuit is filed in 2026. The 2026 policy covers it, assuming the policy has been active continuously since 2024.
- Tail Coverage (ERP): Required to cover claims filed after the policy is canceled or non-renewed.
- Occurrence Policy: Triggered when the incident (error or omission) occurs.
- Usage: More common for commercial general liability (CGL), rarely for professional design liability.
- Example: A designer makes an error in 2024. The lawsuit is filed in 2026. The 2024 policy covers it, even if the policy was cancelled in 2025.
- Tail Coverage: Not required.
- Essential Terms:
- Retroactive Date: The date that claims-made coverage begins. The policy will state a specific date or will be full prior acts. Any claim reported must stem from work done after this date.
- Tail Coverage (Extended Reporting Period): A policy extension purchased to cover future claims against past work after a claims-made policy is cancelled.
A/E Pronet has additional articles about a claims made policy. https://aepronet.org/?s=claims+made&submit=
If your firm has any questions about a claims made professional liability policy for engineers and architects please call, or email, your Professional Underwriter agent for assistance.