A Florida-based independent insurance agency has a Professional Liability (E&O) policy with a claims-made trigger. The policy period is from January 1, 2023, to January 1, 2024. The agency discovers an error made by an agent on December 15, 2023, but the client does not report the claim until February 15, 2024. Assuming the agency did not renew their E&O policy and did not purchase an extended reporting period endorsement, would this claim be covered?
- AYes, because the error occurred during the policy period.
- BNo, because the client did not report the claim within 30 days of the policy expiration.
- CNo, because the claim was reported after the policy expired and without an extended reporting period.
- DYes, if the agency had knowledge of the error during the policy period.
Show answer & explanationAnswer & explanation
Correct answer: C. No, because the claim was reported after the policy expired and without an extended reporting period.
A claims-made policy requires both the incident (error) to occur and the claim to be reported to the insurer during the policy period, or within an extended reporting period (tail coverage). Since the claim was reported after the policy expired and no extended reporting period was purchased, coverage would be denied.
Why the other options are wrong
- A. While the error occurred during the policy period, a claims-made policy also requires the claim to be reported within that period or an extended reporting period.
- B. There is no standard 30-day reporting window after expiration for claims-made policies without an explicit extended reporting period endorsement.
- D. Knowing about the error is not sufficient for coverage under a claims-made policy; it must be formally reported to the insurer.
Claims-Made Policy Trigger
A type of liability insurance policy trigger where coverage is activated only if the claim is made (reported to the insurer) during the policy period or an agreed-upon extended reporting period, regardless of when the incident occurred.
- Claim must be reported during policy period.
- Incident can occur before or during policy period.
- Extended Reporting Period (ERP) is crucial for late-reported claims.
- Different from 'occurrence' trigger policies.
Memory trick: Triggers: 'Occur' when it happens, 'Claims' when it's reported.