Claims-Made Policy

A claims-made policy differs fundamentally from an occurrence policy in how it triggers coverage. Under a claims-made form, coverage applies only if the claim is reported to the insurer while the policy is in force and the wrongful act occurred on or after the policy's retroactive date. This structure is standard for professional liability, directors and officers liability, employment practices liability, and cyber liability policies that apartment owners may carry.

The retroactive date is a critical feature of any claims-made policy. It establishes the earliest date from which covered acts are eligible for coverage. If a wrongful termination occurred before the retroactive date, the claim is excluded even if it is reported during the policy period. When switching carriers, apartment owners must ensure the new policy's retroactive date matches or precedes the original policy's retroactive date to avoid a gap in coverage for past acts.

The most significant risk with claims-made policies arises when coverage is cancelled or not renewed. Once the policy ends, no further claims can be reported under it, even for incidents that occurred during the policy period. To address this, insurers offer an extended reporting period (also known as tail coverage) that allows claims to be reported for a specified time after the policy expires. Apartment owners who cancel a claims-made policy—whether due to a carrier change, property sale, or portfolio restructuring—should always purchase tail coverage to protect against latent claims that surface after the policy ends.