E&O Tips

E&O TIP: Handling Claims-Made Policies

Utica National Insurance Group E&O Risk Management

Professional Liability Coverage – also known as Errors & Omissions Coverage – is typically written on a claims-made basis.

Claims-made coverage is unique in that it requires claims to have occurred on or after the retroactive date of the policy and to be submitted during the policy period or an extended reporting period for there to be coverage. Claims from these policies typically involve issues surrounding retroactive dates and extended reporting period coverage. To help avoid these types of claims, the following is advised:

  • Maintain retroactive dates when moving claims-made coverage to a different carrier.  The client loses coverage for all activity prior to the retroactive date when a retroactive date is not maintained. Check your quotes and policies carefully to ensure the correct retroactive date has been established on the policy. Carriers are unlikely to accommodate modifications to the retroactive date once a claim has been submitted.
  • Explain the negative impact to their coverage if your client wants to use a new retroactive date to save money because they believe they have no past exposure. If they choose to proceed, have them confirm in writing that they understand the ramifications of using a new retroactive date and would like to proceed.
  • Advise the client of the need to purchase an extended reporting period to cover past business in instances where you are moving coverage from a claims-made to an occurrence policy form.
  • Advise clients in writing about the available extended reporting period options and the length of time they have to make the purchase in the following scenarios:
    • They do not renew coverage through your agency, even if you believe they have secured coverage elsewhere.
    • The business is sold or dissolved.
    • Coverage is cancelled and new coverage cannot be secured with a continuous retroactive date. Note: Consult the policy form as the reason for cancellation may impact whether an extended reporting period can be purchased.
  • Advise clients to purchase the maximum amount of time available if they ask your opinion on the length of extended reporting period they should purchase.

Following these tips can help your agency avoid claims related to claims-made policies.