Making Sense of Claims-Made-and-Reported Policies

Many insurance policies are written on what is called a “claims-made-and-reported” basis. The jargon can be confusing, but once broken down, these policies are all about timing. In this bulletin, we help explain what a claims-made-and-reported policy means. 

What is a claims-made-and-reported policy?

• The answer is in the name. Under a claims-made-and-reported policy, any claim must be first made and reported during the same policy period.
• Professional Liability/E&O policies and D&O policies are typically written on this basis.
• Note: This is different from the typical “occurrence” policy (for example, a General Liability policy), which responds so long as the underlying damage (for example, bodily injury or property damage) takes place during the policy period.

So, what is a claim?

• Generally, a “claim” in a claims-made-and-reported policy means not only receipt of a lawsuit (or institution of an arbitration proceeding) against you, but also any pre-suit demand for money or services.
• Many claims-made-and-reported policies also address potential claims – matters for which there is not yet a demand for money or services, but which the insured reasonably believes may develop into a claim. Such policies usually state that if the insured provides the necessary details on the potential claim, and a claim later develops, it is treated as “first made” when the details were first reported. It doesn’t matter when the claim is ultimately made.

What about Extended Reporting Periods?

• An Extended Reporting Period is a length of time after the policy expires when an insured may still report claims that were “first made” during the policy period.
• Many policies will contain an Automatic Extended Reporting Period. These provide the insured with more time after the policy period expires to report a claim (provided certain conditions are met), typically at no additional cost.
• Many policies will also offer an Optional Extended Reporting Period, which provides a longer period of time, post-policy expiration, to report the claim.

What happens if the claim is reported after policy expiration/after the extended reporting period expires?

• Timing is key. Claims-made-and-reported policies are specifically written so that only matters reported timely (within the policy period or, if applicable, an Extended Reporting Period) are potentially covered.

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Bulletin provided by Phelps Dunbar, LLP. Disclaimer: the information contained in this bulletin is for general guidance and educational purposes only and does not constitute legal advice. Discussion of insurance policy language is descriptive only; every policy has different language and is subject to different terms and conditions. Please refer to your own policy for its specific language.