Serving the Insurance Needs of Physicians, Medical Groups and Hospitals Across the USA

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An "occurrence" policy covers claims arising from events occurring while the policy is in force, regardless of when the claim is first made.

A "claims-made" policy covers claims reported during the policy term, provided the event occurred after the effective date of the first policy issued. An earlier "retroactive" date may be specified in the policy to cover acts occurring prior to the original effective date.

Under a "claims-made" policy, a claim is not covered if it is made in a policy year following the occurrence unless the claims-made coverage continues in force. If it does not, run-off coverage (tail) must be purchased to cover residual claims reported later. Claims-made policies are cheaper than occurrence policies for the first several years of coverage. This is because the potential for claims builds slowly as policy years accumulate.

The differences between these policy forms are best illustrated by the following examples:

  • A physician purchased an occurrence policy effective from June 1, 2000, to May 31, 2001. In August 2000, the doctor performed surgery on a patient. In 2003, the patient files a claim alleging negligence related to the surgery. Under an "occurrence" form, the policy bought in 2000 covers that claim.
  • If the physician bought a "claims-made" policy in 2000 and did not purchase "tail" coverage when the policy expired in 2001, there would be no coverage because the claim was made after policy expiration. However, if the doctor bought an indefinite tail in 2001, then the tail coverage policy would cover the claim.

Instead of buying a tail, a physician may purchase "nose" (prior acts) coverage. This is done by way of a retroactive date on a new or replacement policy. A new claims-made policy with a retroactive date of June 1, 2000, would cover this claim because the retroactive date is prior to the surgery date. Without tail or nose coverage, this claim would not be covered. Retroactive or nose coverage is useful only if a provider purchases new, continuous coverage each time he or she changes insurance companies.