Claims-Made Insurance Policies

Posted on January 5, 2012. Filed under: Commercial | Tags: , , , , , |

What is a claims-made insurance policy?

This is a great question, and one that our customers ask from time to time.

A claims-made insurance policy is most often used to provide professional liability coverage, such as the coverage needed by lawyers and doctors to protect them from malpractice claims. But it is also used frequently for other types of liability insurance, such as employment practices liability, directors and officers liability, and products liability. It is sometimes used for the general liability insurance that all businesses purchase.

Most general liability insurance policies are written in a coverage format known as an “occurrence form.” This type of policy covers accidents that occur during the policy period, no matter when the accident becomes known to the insured or is reported to the insurer. This may result in the insurer providing coverage for accidents reported long after the policy has expired.

For example, a person could take a new drug today and not know for years that the drug has caused some type of injury. If the injury is later discovered and that person sues the drug manufacturer, the suit will be defended and any resulting judgment will be paid by the policy that was in effect when the injury occurred, not by the policy that was in effect when the injury was discovered or the lawsuit was filed.

The period of time between the occurrence of injury and the actual reporting of the claim is often referred to as the long “tail” of liability insurance.

This time delay causes several problems for insurance companies. They are often forced to pay claims with inflated dollars since the premium charged for the coverage was based on the loss experience data available at the time the policy was written, not at the time of the claim. In addition, insurance companies may end up paying claims based on awards by a court system that is more liberal today than it was in previous years.

Finally, a covered accident or occurrence is not always a well-defined term. Some occurrences take place over a period of years. As a result, insurance companies may end up paying for a single claim using the limits of several policies over a number of years.

These problems with the occurrence form led to the development of the “claims-made” policy form. The typical claims-made policy provides coverage for injury or damage no matter when it occurred as long as the claim against the insured is presented during the policy period.

Some claims-made policies contain a “retroactive date” that precedes the effective date of the policy and allow coverage for acts that occurred prior to the policy period. This is called “prior acts coverage.”
Some policies also allow an extended time period for the reporting of claims after the expiration date of the policy. There could be a “basic extended reporting period” for a short amount of time, usually provided for no additional cost. There could also be a longer “supplemental extended reporting period” made available for additional premium.

There are two potential coverage gaps when using a claims-made policy form:

  • The insured may be without coverage for a claim filed after the policy expires if it is not replaced with a similar policy that provides prior acts coverage. Since the claims-made policy responds only to claims that are made during the policy period, there would be no coverage for a claim arising out of an occurrence during the policy period but not reported until after the expiration of the policy or the extended reporting period.

  • The policy will not respond to a claim arising out of an occurrence prior to the effective date or the retroactive date, even if the claim is reported during the policy period.

These coverage gaps can be avoided by careful attention of the insured and the agent. Close attention to the retroactive date and the use of extended reporting period provisions will alleviate these problems.

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This article was prepared and made available to your agent by the Independent Insurance Agents of Texas, which is solely responsible for its content. Please read your insurance policy. If there is any conflict between the information in this article and the actual terms and conditions of your policy, the terms and conditions of your policy will apply. The Independent Insurance Agents of Texas is a non-profit association of more than 1,800 insurance agencies in Texas, dedicated to helping its members succeed, in part by providing technical resources that explain insurance policies sold to their customers.

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Questions to Ask: Choosing an Insurance Agent

Posted on December 8, 2011. Filed under: Commercial | Tags: , , , , , , , , , |

Have you ever used the “eenie, meenie, miney, mo” method to locate an insurance agent? Or, maybe you look for the agent with the biggest ad in the yellow pages? With all the quoting sites available online, it’s easy to find low rates. But, how can you be sure those rates are attached to adequate coverage and superior service?

Insurance protects your most important assets, which makes it worth the effort it takes to find an experienced, independent agent. Here are some things you should know:


  • The insurance companies to which the company has access. Independent agents, who have access to multiple insurance companies, have the ability to look for the best policies to meet your unique needs at the best value.
  • How much time the agent will spend helping you assess your insurance needs. Insurance is a complex matter. It is not a “one size fits all” product. It takes time to fully assess your unique coverage needs.
  • Whether the agent reads AND understands the policies they offer.
  • If the agency specializes in insuring a particular type of business or line of insurance. For example: businesses that require insurance including professional liability insurance such as real estate agents, accountants, doctors, contractors, or computer programmers or technology related operations, etc.
  • If this was a referral, did it come from someone you trust and respect? Find out what their experience with the agent was like. The things other people desire and want may not be the same things that you want in a professional service provider.
  • Whether the agency can address all of your insurance needs, from home and auto, to life, health, disability, and commercial.
  • Ask who will handle your account on a daily basis. Is it someone who is licensed in insurance, and can provide advice as you communicate with that office, or an order taker?
  • What the agency’s hours of operation are, including their availability after hours, as well as the average time it takes to respond to client requests.
  • What involvement the agent has in the claims process. Understand how claims are tracked and the role the agent takes in the resolution of disputes.
  • Whether the agent is proactive in periodically reviewing your policies and shopping coverages for you.
  • If the agent is involved in their community. An agent’s active involvement in their community may translate into a greater commitment to his or her customers.

Choosing the best independent insurance agent for your needs takes an investment of time on your part. But the interests they will be helping you protect are certainly worth it, don’t you think?

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Reduce Your Social Host Liquor Liability Exposure

Posted on November 30, 2011. Filed under: Personal (Home & Auto) | Tags: , , , , , , , , , |

The National Highway Traffic Safety Administration (NHTSA) estimates that nearly 13,000 people per year (about 35 per day) are killed in alcohol-impaired driving crashes.

Many of these tragic accidents happen after an inebriated person leaves a party—an event in which the host of that party might be held liable for injuries and deaths to innocent parties. Although there might be coverage under your personal auto policy or homeowners policy if you (as the host) are held legally responsible for such a terrible accident, a wiser risk management strategy is to avoid or reduce the chance of loss altogether. With that in mind, here are some tips to consider if you (or a resident family member) occasionally host social events involving alcohol.


  • Surveys of youth indicate that the most common source of alcohol is the young person’s own home. Thus, closely monitor social events your youth hosts to make sure there is no drinking allowed—particularly any type of illegal underage drinking. It is wise to not allow your teenager to host a party when you are out of town.
  • Limit the amount of alcohol at your event.
  • If alcohol is served at your party, make sure that there is plenty of food. The consumption of food slows down the absorption of alcohol.
  • Encourage designated drivers and provide nonalcoholic drinks for these guests.
  • Look for signs of intoxication. An intoxicated person often has trouble walking, has slurred or loud speech, or is atypically uninhibited. There is not, however, a fool-proof method of determining whether someone is intoxicated because exceptionally tolerant individuals often do not show signs of tipsiness even though they are intoxicated.
  • Restrict alcohol to any near-intoxicated or intoxicated persons by offering instead some food or alternative nonalcoholic drinks.
  • Consider hiring trained bartenders. As they are trained to recognize and deal with intoxication, using professional bartenders can significantly reduce the risk and may help in defending a claim should there be one.
  • If you have a cash bar, use tickets and issue a limited number. Don’t price alcohol too low because this encourages excessive drinking.
  • Do not allow the intoxicated guest to drive away from the event even if you have to take away his or her car keys. Instead, offer to drive them home or provide a free cab service. Soliciting the help of the guest’s spouse or a close friend may help.

Contact us for a free review of your liability coverage or for a quote. Get more personal lines insurance and risk management tips and ideas from IRMI.

Copyright 2009
International Risk Management Institute, Inc.

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Closing Your Business?

Posted on September 23, 2011. Filed under: Commercial | Tags: , , , , , , , , , |

We hope you are not one of the many businesses seriously impacted by the current economy. But, if you are, take a moment to learn more about the possible risk of cancelling your insurance.

Shutting Down Your Insurance – Commercial Liability Insurance

“I’m closing down my business. Will I need to continue any kind of insurance coverage to protect myself and my employees from future lawsuits?”

That’s an excellent question and we applaud your concern for yourself, your family and your employees.

Businesses that make or build or fix things have a continuing need for special liability insurance coverage even after the business shuts down. This coverage is called “discontinued products and completed operations liability” and it protects you and your employees against lawsuits arising out of injury or damage caused by the products you made or the work you completed while you were in business.

But wait! You purchased commercial general liability insurance for years – including products and completed operations liability –while you were making or building or fixing things. If something happens after you shut down, why won’t the policy that was in effect when the product was made or the work was done cover the resulting injury or damage?

The CGL policy does not cover bodily injury and property damage unless the injury or damage occurs while the policy is in effect. It doesn’t matter when you manufactured the product or completed the work. The only thing that matters is when someone is injured or some property is damaged because of your product or your work. A liability insurance policy must be in force when that happens.

If you are closing your business, ask your insurance agent about the availability and cost of “discontinued products and completed operations liability insurance.” There are laws – called “statutes of repose” – that dictate how long you may be legally liable for injury or damage caused by your work or products, and thus how long you may need to carry such insurance.

If you operated your business as a corporation or some other form of limited-liability entity, you may want to ask your attorney about whether you or your employees can be sued personally for accidents caused by your work or products after the business shuts down and the entity is dissolved.


****This article was prepared and made available to your agent by the Independent Insurance Agents of Texas, which is solely responsible for its content. Please read your insurance policy. If there is any conflict between the information in this article and the actual terms and conditions of your policy, the terms and conditions of your policy will apply. The Independent Insurance Agents of Texas is a non-profit association of more than 1,800 insurance agencies in Texas, dedicated to helping its members succeed, in part by providing technical resources that explain insurance policies sold to their customers.

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Technology Companies Beware!

Posted on August 31, 2011. Filed under: Commercial | Tags: , , , , , , , , , |

Insuring technology companies is a complex endeavor. Besides the more basic coverages like general liability, products and completed operations, and errors & omissions, many companies must also consider cyber liability, intellectual property, and invasion of privacy cliams. And, that is just to name a few.

It’s also important to remember that claims do not only arise because of disgruntled employees. Some of the most costly mistakes are just that, simple mistakes. For example:

1. The inadvertant erasure of critical data.
2. An employee accidentally sends an inappropriate email to the wrong recipients.
3. Failure to meet deadlines, agreed upon specifications, or compatibility requirements.
4. Software failures, which cause other damages such as bodily harm or even death (ex. transportation system programs, hospital or other medical treatment systems, etc.).

All of the above can lead to costly judgments, often in excess of the actual losses or damages that may have been caused.

To ensure you have adequate coverage, we recommend you choose an insurance agent that not only understands the exposures you face, but the business you do.

We are your technology insurance expert. Located in Austin and serving the great state of Texas. Call us!

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General Liability and E&O . . . NOT Interchangeable

Posted on July 27, 2011. Filed under: Commercial | Tags: , , , , , , , , , , |

We are focusing our discussion in this article on technology companies. However, much of the information applies to businesses that provide professional services.

Some technology companies have either general liability coverage OR an errors & omissions policy. However, both are extremely important to ensure the proper coverage for businesses in the technology (among other professional services) industry. Here is why:

General Liability:

General Liability provides two primary coverages: bodily injury and property damage, either arising from your products, services or operations. However, it often DOES NOT cover:

  1. Electronic data and media property losses, for example.
  2. Economic losses, such as a product causing the loss of customers.
  3. Product recall costs, which must be added by endorsement or through a separate policy.
  4. Generally speaking, professional services and/or advice, and any resulting liability, will be excluded.
  5. Personal and advertising injury specifically for new media, which is expanding to include more and more companies as the technology industry evolves.

Errors and Omissions:

Technology E&O, or Professional Liability, is often overlooked or purchased only when required contractually. But, it is a critical coverage that every technology company should obtain. It is also critical that you work with an insurance agent with an expertise in the technology industry and its coverages, as there is no standard form and policy comparisons are extremely difficult for the general public.

At the most basic level, E&O policies are intended to cover economic loss liability and damages to tangible and intangible property not associated with physical injury. Generally speaking, E&O will not provide coverage for bodily injury, property damage, or personal and advertising injury. It is important to remember that E&O coverage only applies to damages arising from technology products or services, while a GL policy normally covers damages resulting from all products, services and operations.

Rather than obtaining either a General Liability policy or E&O insurance, it is best for a company to purchase both coverages so that coverage gaps, which might otherwise exist, are closed.

There are other ways Technology E&O differs from a General Liability policy, including:

  1. Claims reporting periods.
  2. Deductibles usually apply to E&O policies, but not GL policies.
  3. Whether defense costs reduce the limit of liability on the policy.
  4. Does your E&O policy exclude dishonest acts with no exception for “innocent insureds”? If yes, consider removing this exclusion from your policy.

In addition to the liabilities and losses mentioned above, technology companies also face risks from cyber space claims, network security concerns, privacy allegations, infringement and media liability allegations, etc. While not necessarilly addressed by a Technology E&O policy, these exposures can be covered through endorsements.

The most important take-away from this information is that you need an insurance agent with technology expertise. The more capable your agent is at understanding your business, the more able they will be to secure you appropriate coverage. And a Trusted Choice independent agency is able to quote with multiple insurance companies specialized in your type of risk to ensure not only the best coverage but at the best price.

In addition to his insurance experience, the founder of Keystone Insurance Services, Inc. has an M.S. in Nuclear Physics and has fourteen years experience in technology fields. We are your technology insurance expert. Call us today for a free, no obligation, review of your company’s coverage.

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Business Owners Beware

Posted on December 10, 2010. Filed under: Commercial | Tags: , , , , , |

Did you know that your General Liability policy may contain known-loss and late-notice provisions? These provisions and your failure to act promptly may cause your insurance company to deny your claims. If any occurrence which may result in a claim is not reported promptly to your insurance company your insurer may deny your claim.

Additionally, a Commercial General Liability (CGL) policy may not cover all exposures, damages, claims and suits arising from the actions of its individual officers. A Directors & Officers (D&O) policy typically covers “wrongful acts” by individuals with the capacity to make decisions on behalf of an entity. For those acts that may be excluded from a D&O policy, other professional liability coverage may be needed.

Check with your agent to ensure you have the necessary protection for your company. Or, give us a call. It’s a great time to look into both General Liability and Directors & Officers coverage. We are located in Austin and licensed in Texas.

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