To understand retroactive date, let's first look at understanding the how a claims made policy and a claims
occurrence policy works.
Occurrence policy is liability coverage that responds during the policy period even if the claim is brought months or years after the policy expired.
These examples illustrate that changing from an
occurrence policy to a claims-made policy did not eliminate disputes about triggers of coverage.
In fact, a key to distinguishing a claims-made policy from an
occurrence policy is the very absence from an
occurrence policy of a discovery or manifestation requirement.
For example, if insurers systematically underestimate incurred losses for occurrence policies, using the reported loss ratio would overestimate the profitability of the
occurrence policy line of business.
This is when the other insurance is an "occurrence" policy with an effective date prior to the inception date of the claims-made policy; and the claims-made policy either has no retroactive date or has a retroactive date earlier than the expiration of the
occurrence policy.
The
occurrence policy is treasured for its relative simplicity and because a continuous string of occurrence policies may not be quite as susceptible to potential gaps in coverage as may be the case with claims-made policies that are not appropriately handled by those holding the responsibility of managing a company's risks.
In short, the cause of the insured's liability determines the number of occurrences, but that cause does not trigger coverage under an
occurrence policy.
Conversely, under an
occurrence policy, only the allegedly negligent acts' of the insured nurse, which occurred during the time the occurrence coverage was in effect are covered.
These policies are on a "claims made" basis, he explains, meaning coverage needs to be in effect when the claim is made, as opposed to an
occurrence policy such as auto or product liability.
An
occurrence policy, which is offered on general liability, automobile liability and umbrella forms, triggers coverage when an "occurrence" happens during the policy period, regardless of when the claim is made.
By way of contrast, an
occurrence policy is one that provides insurance coverage for claims that arise during the policy period even if the claim is made after the end of the policy period.
