Most liability policies purchased by companies in the electronic security industry, or any of the construction trades, will be on an “occurrence-based” policy form.   This policy form is relatively straight-forward: it covers incidences (i.e. damages or injuries) that originally occur when that policy was in force, regardless of when those damages are discovered or get reported as a claim.

This contrasts with the “claims-made” policy form, which is commonly used for malpractice coverage in professions like law and medicine, as well as for architects’ and engineers’ professional liability.  These claims-made policy forms respond to claims that are reported during the policy period, regardless of when the underlying event actually occurred – provided it took place after the policy’s prior-acts (or “retroactive”) start date.

So, when might a company in the construction or alarm space encounter a claims-made policy, and what extra precautions should they keep in mind in those scenarios?

Policy types commonly provided on a claims-made basis include the following:

• Directors & Officers Liability (D&O) coverage
• Employment Practices Liability (EPL) insurance
• Professional Liability (E&O) coverage *when provided on a stand-alone policy*
• Commercial Crime coverage (sometimes)
• Cyber insurance (sometimes)
• Pollution Liability insurance (sometimes)

Key Considerations for Claims-Made Policies

• Retroactive (prior-acts) coverage date.  

The retroactive or prior-acts date is the earliest at which an incident can occur and still be covered under a claims-made policy. For example, let’s say your policy runs from 1/1/25 to 1/1/26, and its retroactive date is 1/1/25.  If you report a claim in 2025 for an incident that actually occurred in June 2024, the claim would be denied—because the incident happened before the retroactive coverage start date.  

Retroactive dates are typically aligned with the earliest date of continuous prior coverage for that type of policy.  However, it’s the buyer’s responsibility to confirm this when securing coverage.  Failure to maintain the correct retroactive date can result in a loss of prior acts coverage moving forward (though occasionally, this can be corrected).

• Claims reporting standards.  

Claims-made policies require that claims—or even knowledge of potential claims—be reported during the active policy term. This includes “incidents,” “circumstances,” or events that haven’t yet escalated into formal claims.  Therefore if your business becomes aware of something that might lead to a claim down the road, it’s wise to place your claims-made policy’s insurer on notice of a potential occurrence as soon as possible and definitely during the current policy period, as failing to report a potential issue in time can lead to a denial of coverage later, even if the claim itself is valid.  

Claims-made policies offer essential coverages for many businesses, and managing them effectively can be done easily enough when keeping the above factors in mind.  For more information about claims-made policies, or other insurance or risk management questions, please contact us today at 800-530-4448, or info@eclipseinsurance.com.

About the Author

Larry St. John is a 20+ year veteran of insurance and risk management for the construction and electronic security industries.

He can be reached at LStJohn@eclipseinsurance.com