Under a claims-made policy, the insured is required to file claims during the policy period or during the extended reporting period (ERP), if applicable. However, there are two distinct types of claims-made policies. One is the "Claims-Made & Reported Form" and the other is the "Pure Claims-Made Form." While the differences of the policies are subtle, not understanding the differences can have a significant impact on your coverage.
The most commonly used claims-made policy is the "Claims-Made & Reported Form." This policy requires that not only must the claim be made during the policy period or ERP; it must also be reported during this same period. This means that the insured has a designated time frame within which claims can be filed.
The "Pure Claims-Made" Form is less prevalent. It also requires that a claim be made during the policy period or the ERP. However, the major difference between this and the "Claims-Made & Reported Form" is that under this type of policy, the insured is only required to report the claim as soon as possible. This means that the report of a claim may happen after the policy's expiration.
If your company's professional liability policy is a "Claims-Made & Reported Form," then time is an important factor when a claim needs to be filed. It is your obligation to report a claim or a potential circumstance that could lead to a claim to your carrier within the policy period or the ERP. If you attempt to handle the situation internally to avoid reporting it to your carrier, the delay could negatively affect your coverage. Professional liability polices are very specific as to how and where to report a claim. Failure to comply with these provisions can negate your coverage. The "Pure Claims-Made" policy, on the other hand, only requires that the claim be reported as soon as practical, which allows for more flexibility. This means that the claim can be reported at any time in the future even after the policy expires.
In addition to the issue of claim reporting time, many "Claims-Made & Reported Form" policies have an awareness provision that allows the insured to report any circumstance that may lead to a future claim. Such notice must also be given during the policy period or ERP.
When a circumstance is reported, it's considered to have been reported during that policy period even if it results in litigation after the policy has expired. Because each policy has a different reporting provision, it is important that you know your policy's reporting requirement to ensure your coverage remains in effect.
Keep in mind that any extended reporting period provided by the policy only extends the period in which a claim may be reported. The wrongful act that precipitated the claim must have taken place before the policy expired.