|
Liability
Insurance - Occurrence V's Claims Made Wordings ...
For
an occurrence wording then, the emphasis when determining whether or
not the policy will respond is on when the event that led to the claim
occurred, whereas with claims made wordings the emphasis is on when
the claim for legal liability was made against the insured.
However,
extremely important in relation to claims made policies is the fact
that when the event that led to the claim for liability actually
occurred is also critical to the decision as to whether the policy
will respond. A claims made policy will contain a
"Retroactive Date". The policy shall only provide
cover in respect of events that give rise to the liability occurring
after the Retroactive Date specified in the policy. It is
possible that a policy will provide Unlimited Retroactive Cover, which
means that the policy will respond irrespective of when the event that
leads to the liability occurs. The Retroactive Date is obviously
critical.
Therefore,
for a claims made policy wording to respond, the alleged breach that
has resulted in the claim, must have occurred after the Retroactive
Date stated in the policy schedule, and the pending claim
must be made against the insured and reported to the insurer during
the period of cover.
|
|
So
what does this mean to the policyholder? It means that you must
be most particular as to the type of wording that applies to your
policy, and if it is a claims made wording you must be most particular
that the retroactive date is appropriate to your requirements.
This is extremely important when you are changing insurers, and especially
when claims made wordings are involved. Continuity of
cover is essential because any periods of lapse in cover will place
the client in a position of being self-insured.
Consider
a hypothetical example. You have a Professional Indemnity policy
that is a claims made wording (as they usually are) and decide to
change insurers when the policy is due for renewal on 1st July
2001. The Retroactive Date on your new policy is the same as the
commencement of the cover, namely 1st July 2001. The policy is
renewed each year, and then in 2003 you receive advice of legal action
claiming a wrongful act by one your coaches that goes back to
2000. You report this to your insurer, to be told that whilst
the action against you is being taken during the period of cover the
alleged wrongful act is prior to the Retroactive Date of your policy
and therefore the policy will not respond. In a panic you go
back to your previous insurer, to be told that whilst the alleged
wrongful act was during the period of cover of their insurance policy,
the date of the action against you is outside the period of
their policy and therefore the policy will not respond. Strike
three - you're out.
....Continued page
3
|
