Opinion ID: 1727608
Heading Depth: 1
Heading Rank: 3

Heading: Claims-made versus Occurrence Coverage

Text: One of the seminal statements on the subject of distinguishing claims-made from occurrence policies was: With the development of a more complex society, it became more reasonable, particularly with respect to the activities of professionals, to insure against the making of claims, rather than the happening of occurrences, and claims made insurance developed to meet a need for professionals to insure against the making of a claim as the insured event, rather than having to struggle with traditional concepts and difficulties inherent in determining whether the event insured against was the commission of an act, error or omission or the date of discovery thereof or the date of injury caused thereby. The major distinction between the occurrence policy and the claims made policy constitutes the difference between the peril insured. In the occurrence policy, the peril insured is the occurrence itself. Once the occurrence takes place, coverage attaches even though the claim may not be made for some time thereafter. While in the claims made policy, it is the making of the claim which is the event and peril being insured and, subject to policy language, regardless of when the occurrence took place. Sol Kroll, The Professional Liability Policy Claims Made,  13 Forum 842, 843 (1978). In Livingston Parish School Board v. Fireman's Fund American Ins. Co., 282 So.2d 478, 481 (La.1973), this court rejected a public policy attack on a claims-made policy. The insured in that case was an engineer who had procured coverage on a claims-made basis continually from the same insurer from July 11, 1966 until July 11, 1969. During that time, the engineer had provided professional services to construct a new building. Three days after the policy expired and the engineer had decided not to renew the policy, the roof of the building collapsed, and suit was filed against the engineer and others. In denying coverage of the claim against the engineer, the insurer relied on its policy requirement that not only must the negligent act occur during the policy period, but also a claim therefor [must be] first made against the insured during the policy period. The court, in analyzing the engineer's public policy argument, framed the issue as whether the clause itself offends public policy as being manifestly unfair or oppressive, and as unreasonably restricting the coverage to claims for policy-covered negligence which are actually made within the year or within policy periods provided by successive and continuously renewed policies with [the same insurer]. Id. at 481. (emphasis in original). The court concluded that no reasonable expectation of coverage by the insured was defeated by the unambiguous provisions clearly limiting coverage to those claims made during the policy period, stating [i]n effect, the insured received what he paid for by the present policy, with premiums presumably reduced to reflect the limited coverage. Id. at 483. Thus, the court held that a claims-made policy that clearly limits coverage to acts discovered and reported during the policy period is not per se impermissible. [5] Id. at 481. In the twenty-six years since the Livingston Parish School Board case was decided, the trend nationwide has been generally to uphold claims-made policies. As a result, insurers have further refined such policies, and the use of that type of coverage in certain settings, especially those in which long tail liability is presented, has become commonplace. Harry W.R. Chamberlain II, Claims-Made Policies are Enforceable in California: Trends after Burns v. International Insurance Company, 28 Tort & Ins. L.J. 98 (1992).