There are two ways that Professional Liability Insurance can be underwritten by an insurance company: as occurrence coverage or as claims- made coverage. With occurrence coverage, the Professional Liability Insurance policy responds to any claim triggered by an event during the policy period, no matter when that claim is filed.
This means, for example, that if a professional has a Professional Liability Insurance policy covering the calendar year 2011, any suits or claims that are triggered by actions performed in that year are paid by the policy he or she had at that time - even if the claim is filed in 2012 or years later.
Professional Liability claims are sometimes not filed close to the date of the occurrence because the problems or financial damages done to the client may not come to light until later. For example, a client may not discover that there was some defective workmanship on a construction project until pieces start falling apart a few years down the road. Or with Medical Malpractice Insurance, certain health conditions or problems resulting from a doctor's negligence or malfeasance may not make an appearance until long after the treatment is over.
With occurrence coverage, the professional knows that he or she is covered for that time period no matter when claims occur. There is no need for prior acts coverage or tail coverage to fill gaps. However, occurrence coverage can be very expensive because claims for acts occurring during the time period of the policy could be filed far into the future, and it can be difficult for the insurance company to predict how many claims will come in over time. Unlike with other ways of writing insurance, with occurrence coverage there is no end point where the claims will stop.
Occurrence insurance can also be viewed as somewhat inflexible because no matter how much insurance a professional has now, or what features exist at the present time, the insurance policy that responds is always the one that was in force when the actions were committed. Still, the permanence can be considered a strong feature to some consumers because whatever happens with their insurance in the future, they are always insured for acts that occurred during the insured period.
Professional Liability Insurance Directory