Stake a Claim
With liability insurance, timing is everything.
When an incident occurs and a claim is reported immediately, the
process is fairly straightforward. But what if a period of time
passes after an incident? Let's say a business consultant gave
a client advice in 2002. The client followed the advice and
suffered economic damages because of it in 2004. But the consultant
changed liability carriers in 2003--so who responds to the
claim?
That depends on whether the coverage was written on a
claims--made or occurrence basis, says Dana J. Coates, president of
United
Agencies-United Western Division, a Pasadena, California-based
insurance agency. A claims-made policy protects against claims or
incidents that are reported while the policy is in force,
regardless of when they happened. An occurrence policy covers
claims for incidents that occurred during the policy period,
regardless of when the claims are reported.
If the consultant has a claims-made policy, the current carrier
will handle it. If he has an occurrence policy, he'll need to
go back to the carrier that was covering him during 2002 and hope
that company is still viable and able to defend the claim.
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Which form is best for you depends on how likely you are to be
the target of a claim for something that happened in the past.
Claims-made coverage "has become the coverage form of choice
on virtually all [professional liability] malpractice exposures and
for all perceived high-risk products," says Coates. Your agent
can help you make the right choice.
Jacquelyn Lynn is a freelance business writer in Orlando,
Florida.