Charles Malmquist,


Paul Tuggle, CPCU


Ron Cuen

John Lowden


Kevin Chojnacki

There are two primary forms of professional liability insurance available to physicians and surgeons: Claims Made and Occurrence. Both types of policies provide appropriate, quality protection against allegations of malpractice; however, their significant differences lie in pricing structure and the protection afforded after the policy is cancelled.

A Claims Made policy protects the policyholder against claims reported while the policy is in force, as long as the incident took place on or after the initial, or Retroactive, date of coverage.

An Occurrence policy protects the policyholder against incidents that occurred while the policy was in force, regardless of when the claim is reported.

With Claims Made coverage, the limits of liability in effect when the claim is made are the limits that apply toward any settlement or judgment. Claims Made coverage permits the policyholder to adjust coverage limits, giving the insured the ability to keep pace with the current claim and legal climate.

With Occurrence coverage, the limits of liability in effect when the incident occurred are the limits that apply toward any settlement or judgment, regardless of when it is reported.

Claims Made premiums are based on the potential for a claim against a policyholder. Since the risk of a claim being filed during the first claims made year is small, the premium for the first claims made year is relatively low. As the length of time the policyholder is insured increases, the potential for a claim also increases; thus the annual premium increases to reflect expanding liability. This stairstepping of premium continues for five years until the Retroactive Date matures. At that point, assuming there are no rate increases/ decreases or changes in policy coverage, the premium remains the same year after year until the policy cancels at which time an Extended Reporting Endorsement (Tail coverage) must be purchased to continue to afford protection upon cancellation.  (Read more about Claims Made Policy structure.)

Occurrence premiums are based on projections of anticipated claims. Since the insurance carrier does not know how many incidents will give rise to claims or when those claims will be reported, the premium must be high enough from the very beginning of the policy to cover claims that might not be reported until many years later. Unlike the stair-stepping pattern of Claims Made premiums, Occurrence premiums are paid in full, and the policy continues to afford protection even after it has been cancelled.

When a Claims Made policy is cancelled or non-renewed, the policyholder must purchase an Extended Reporting Endorsement (Tail coverage) in order to be protected for any future claims. A Tail provides coverage identical to that of the expiring Claims Made policy and covers policyholders for claims arising between the date the Claims Made policy began (the Retroactive Date) and its cancellation or non-renewal, but which are reported after the policy has been cancelled. On the other hand, obtaining Prior Acts (Nose) coverage on a new Claims Made policy
makes purchasing Tail coverage unnecessary because the new carrier will use
the same Retroactive Date the policyholder maintained on the previous policy.
By picking up the policyholder's Prior Acts, the new carrier agrees to provide
protection for claims reported after the cancellation of the prior Claims Made policy.
                                                    -Go to Page 2-


                  Claims Made vs. Occurrence: 
     Professional Liability Insurance for Physicians

900 Ashwood Parkway  |  Suite 100  |  Atlanta, GA 30338  |  Main 770.399.6760  |  Fax 770.399.6647  |

May 2007

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The information contained above is intended to be illustrative and discusses general insurance issues.  It is not designed to give any specific legal advice pertaining to any specific circumstance.  It is not intended as a policy of insurance, binder, or state of coverage or as an amendment, modification or waiver of the terms and conditions of any policy of insurance.  In every instance, a policy is the only accepted statement of coverage, and it is important to read and understand your policy. Contact your agent if you have questions regarding your coverage.

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