Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
To properly answer this question I would need additional information. However, liability policies are written on either an occurrence basis or claims-made basis. If insurance was cancelled but was in force when the incident occurred, the company would be obligated to defend on an occurrence form. If the claim was filed after the policy was cancelled, the company issuing the claims-made policy would not be required to defend. However, in litigation plaintiffs seek relief from every insurance company remotely involved with the case.
In a Business General Liability policy that was written on an occurrence form, if the incident in question occurred while the policy was still in force, the company on the policy would respond. If it were a claims made policy and you purchased a "tail" endorsement which would allow you to extend the period of time for making claims and the occurrence happened during the in force period of time of the policy and the claim was make after cancellation but prior to the end of the claims-made "tail" coverage period, the company would respond. If no extended period (tail) endorsement was purchased the claims made policy would not respond.
President, Insurance Associates Agency Inc., West Chester, OH
The other respondents explain that two basic triggers exist within common liability coverage policies. It is important to realize that most personal insurance - auto, home, motorcycle, rv - are based upon the occurrence trigger in the insurance policy. An occurrence is an event including repeated exposures to the same condition, that cause loss covered by the policy. You'll understand that if the loss "occurs" during the policy period, the loss is coverable and a duty to defend exists until such time as it is determined after further investigation that coverage is not provided by the policy. At that time the carrier would probably extend a "reservation of rights" letter to you to notify you that the investigation of the loss events are revealing to the carrier that the loss is not covered for some reason contained within the policy or due to the events that occurred. Nevertheless, if the loss "occurs" during the period the policy was effective, and barring exclusions and limitations, their is coverage in an occurrence policy.
A "claims made" policy changes what triggers the benefits of the policy. In the case of claims made coverage, generally only written on business and professional liability exposures, the trigger is the event and when it occurred. What is different now is that the claims must be first made during the period of coverage or a subsequent policy. If a claim is permitted to be made on subsequent policies, the chain of coverage needs to be uninterrupted and the "retroactive" date for coverage to be set to a point before the actual date of the loss. Claims Made policies were designed to help eliminate the chance that years and years of coverage on an occurrence policy could not be stacked one upon the other to generate large amounts of coverage. In the case of claims made policies, only the current policy limit is exposed to loss and not a stack of limits from policies covering prior annual periods.
One other point that is necessary to understand. Generally, there are limitations on how long after a policy is cancelled for a claim to be presented. Occurrence policies are much more accommodating here. On the other hand, claims made policies have a limited period of time after the policy ends for a claim to be made. This is referred to as extended discovery and extended discovery on otherwise unendorsed policies is only 60 days. That is, you only have sixty days to present a claim for coverage at the end of a claims made policy. Additional extended periods of discovery are available at additional cost but each carrier may have different periods of discovery available. This feature on a claims made policy provides the "tail" of coverage that an occurrence policy includes without additional charge. A "tail" is the time beyond the period of coverage where a claim may be first reported or appear on the books of the carrier. Liability type losses can have a long "tail" due to the nature of the coverage and potential loss. Property losses, on the other hand, generally have short "tails" where the loss is not known. The reserve that the carrier must maintain within its accounting for these losses is not as the IBNR (incurred but not reported) loss reserve. Over time the carrier reduces this reserve in recognition that the further past the end of a policy that they travel, the less likely a loss has occurred or will be reported. This should help you understand just how much must taken into account to answer your generalized question. I hope this helps answer your question.
.JPG){kind=avatar}
A "claims made" policy changes what triggers the benefits of the policy. In the case of claims made coverage, generally only written on business and professional liability exposures, the trigger is the event and when it occurred. What is different now is that the claims must be first made during the period of coverage or a subsequent policy. If a claim is permitted to be made on subsequent policies, the chain of coverage needs to be uninterrupted and the "retroactive" date for coverage to be set to a point before the actual date of the loss. Claims Made policies were designed to help eliminate the chance that years and years of coverage on an occurrence policy could not be stacked one upon the other to generate large amounts of coverage. In the case of claims made policies, only the current policy limit is exposed to loss and not a stack of limits from policies covering prior annual periods.
One other point that is necessary to understand. Generally, there are limitations on how long after a policy is cancelled for a claim to be presented. Occurrence policies are much more accommodating here. On the other hand, claims made policies have a limited period of time after the policy ends for a claim to be made. This is referred to as extended discovery and extended discovery on otherwise unendorsed policies is only 60 days. That is, you only have sixty days to present a claim for coverage at the end of a claims made policy. Additional extended periods of discovery are available at additional cost but each carrier may have different periods of discovery available. This feature on a claims made policy provides the "tail" of coverage that an occurrence policy includes without additional charge. A "tail" is the time beyond the period of coverage where a claim may be first reported or appear on the books of the carrier. Liability type losses can have a long "tail" due to the nature of the coverage and potential loss. Property losses, on the other hand, generally have short "tails" where the loss is not known. The reserve that the carrier must maintain within its accounting for these losses is not as the IBNR (incurred but not reported) loss reserve. Over time the carrier reduces this reserve in recognition that the further past the end of a policy that they travel, the less likely a loss has occurred or will be reported. This should help you understand just how much must taken into account to answer your generalized question. I hope this helps answer your question.