David Adelstein | Florida Construction Legal Updates | August 11, 2019
“Claims-made policies are common in the professional liability insurance market. They “differ from traditional ‘occurrence’-based policies primarily based upon the scope of the risk against which they insure.” With claims-made policies, coverage is provided only where the act giving rise to coverage “is discovered and brought to the attention of the insurance company during the period of the policy.” In contrast, coverage is provided under an occurrence-based policy if the act giving rise to coverage “occurred during the period of the policy, regardless of the date a claim is actually made against the insured.” “The essence, then, of a claims-made policy is notice to the carrier within the policy period.”
Crowely Maritime Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2019 WL 3294003 (11thCir. 2019)
The recent Eleventh Circuit Court of Appeal opinion in Crowely Maritime Corp. discussed the distinction between a claims-made insurance policy and an occurrence-based insurance policy. Professional liability policies are generally claims-made policies whereas commercial general liability policies are generally occurrence-based policies. While this opinion does not involve a construction matter, the case did concern the definition of a “claim” in a claims-made policy and whether such claim was timely reported to the insurer within the discovery period / extended reporting period.
The discovery period in a claims-made policy should coincide with an extended reporting period to report a claim, based on how the specific policy defines a claim. How a policy defines a claim is very important since policies contain different definitions. The discovery period will include language that allows the insured to report a claim that occurred DURING the policy period outside of the policy period within the extended period. The key is that even with a discovery period, the wrongful act giving rise to the claim must still have occurred during the initial policy period, although it can be reported to the insurer after the initial policy period and within the extended discovery period. If the wrongful act giving rise to the claim occurred AFTER the initial policy period, it will not matter if it was reported within the extended discovery period because the claim, itself, arose outside of the initial policy period.
Insurance is complicated and confusing and everything in between. Make sure you understand how your policy defines the term claim, whether you are operating under a claims-made or occurrence-based policy, and what constitutes timely notification of a claim, particularly if you are operating under a claims-made policy.