Claims-Made vs Loss-Occurrence Trigger Clause
The contractual definition of the coverage trigger, determining whether the notification of the claim (claims-made) or the event causing the loss (occurrence) governs which policy period responds.
- Clause type
- Definition
- Origin/Market
- International programme
- Favours
- Neutral
- Negotiability
- Negotiable
Standard wordings
- market-standard trigger definitions in D&O, professional indemnity and EPLI policies (claims-made with retroactive date, alternatively an occurrence trigger)
Purpose
The coverage trigger determines which policy year responds to a given loss. Under the loss-occurrence principle, which underlies classic DACH liability cover per AHB clause 1.1, the event causing the loss during the policy period is decisive, regardless of when the resulting claim is later made. Under the claims-made principle, by contrast, the moment a claim is first made against the insured during the policy period is decisive, usually limited by an agreed retroactive date.
Effect and limits
Occurrence-based cover creates a natural “tail”, since claims can be made years after the policy has ended, which matters for long-tail exposures such as environmental or asbestos losses. Claims-made cover instead requires a separate extended reporting period to protect claims made after expiry for wrongful acts committed during the policy period. In international programmes combining an occurrence-based local policy with a claims-made difference-in-conditions/difference-in-limits excess layer, trigger mismatches can create coverage gaps.
Negotiation and practice
Key negotiation points include the retroactive date, the duration and pricing of the extended reporting period, and consistency of the chosen trigger across all layers of an international programme. Brokers and risk managers should check, in multi-layer programmes, whether the primary and excess layers use the same trigger, to avoid gaps for losses straddling the layer boundary.