Almost every legal malpractice policy sold to lawyers is written on a claims-made basis, and almost every other policy a firm owns is written on an occurrence basis. The difference decides whether a claim about work you did years ago is covered today. It is the most misunderstood term in lawyers professional liability insurance, and the one that produces the most painful surprises.
The short answer
An occurrence policy is triggered by when the event happened. A claims-made policy is triggered by when the claim is made against you. Your general liability and auto policies are occurrence policies: the fire, the fall, or the accident happens on a date, and the policy in force on that date pays, even if the claim arrives years later. Your legal malpractice policy is claims-made: it responds to claims first made against you, and reported to the carrier, while the policy is in force, as long as the work was done after the policy’s retroactive date. When the mistake happened matters less than when the client complains about it.
Why lawyers get the claims-made form
Legal errors surface late. A missed limitations period, a defective deed, a lien that was never perfected: the client may not learn of the problem for years, and the loss may not be quantified for years after that. An occurrence form would leave carriers exposed indefinitely for every year they ever wrote, which is why the professional liability market moved to claims-made decades ago. The trade-off lands on you. The policy that pays is the one in force when the claim arrives, not the one you had when you did the work.
The three terms that follow from it
Retroactive date. The earliest date of work the policy will cover. Work performed before it is not covered, no matter when the claim is made. When you renew or move carriers, this date must carry forward unchanged. A quote that resets it is offering less coverage, not a better price. Prior acts coverage and the retroactive date, explained.
Continuous coverage. Because the policy in force at claim time is the one that pays, a lapse of even a few weeks can leave every year of past work uninsured. Claims-made coverage only works if it never stops.
Tail coverage. When coverage does end, because you retire, close the practice, or join a firm, an extended reporting period keeps the last policy open to claims made later. Tail typically costs 150% to 300% of the final annual premium, paid once, and many carriers grant a free retirement tail after several consecutive years on their paper. If you are moving rather than leaving, the better route is usually to have the new firm’s policy pick up your original retroactive date.
What to check before any change to your policy
- The retroactive date on the new policy matches the one you have now.
- There is no gap, even of a day, between the old policy’s expiry and the new one’s start.
- Any circumstance that could become a claim has been reported to the current carrier before it expires. Once reported, it belongs to that policy regardless of when the claim itself arrives.
- You know your tail terms and the election window, which is often only 30 to 60 days after the policy ends.
- You know whether defense costs sit inside or outside the limit. Two policies at the same price can leave very different amounts for a judgment.
Our guide to reading a malpractice quote line by line covers the other terms that make two quotes non-comparable.
Hear Gary explain it
Below, Gary Beck walks through claims-made and occurrence triggers with Alexandra from The Beck Company, recorded in 2023. The transcript follows the player.
Claims-made vs. occurrence triggers in legal malpractice insurance, with Gary Beck
Transcript
Alexandra: My name is Alexandra I. Am in sales and marketing here at the Beck Company today. My guest is Gary Beck and he’s going to be discussing claims made versus occurrence with us today. So claims made versus the currents, Gary. What’s the difference?
Gary Beck: Well, insurance policies have what are called triggers 1. Trigger is based on an occurrence of when something happened. That’s what most people are familiar with. When did the car accident happen? When did the fire burn the house down? What was the date of the occurrence, however? And professional liability policies like legal malpractice, those are written on what are called a claims made basis. So it doesn’t really go to as a trigger. When the actual negligent act might have happened, the deadline was missed. The lien was missed. Some statute of limitations was allowed to run. It’s when the client actually found out about the issue and made a claim for money. Damages against the lawyer for legal malpractice, saying I was harmed because you were negligent and didn’t meet the standard of care that is a claims made policy or a claims made trip.
Alexandra: So why is this important? And when would it be applicable?
Gary Beck: Well, it’s going to be applicable based on the contract of insurance itself. It’s important because it will provide you coverage or not if you fail to adhere to it, and sometimes they are very complex issues that determine when and if a claim is covered.
Alexandra: OK, so I’m you know, I’m shopping for insurance. Choosing what I want, how do I make sure that I have the right coverage and? Speak to me. Like I don’t know it, I don’t have the verbage well.
Gary Beck: First of all. I often see situations and counsel lawyers. On what is the? Best kind of coverage to have we don’t really have a choice of claims made and occurrence in professional. Almost all of them were written claims made, but even very well educated lawyers often misunderstand the claims made nature, and what the retro date or the prior acts date on that coverage is. That’s why it’s so critically important, because if you don’t pay attention and understand. And get some policy that has the right. You will not have coverage when you. Think you do.
Alexandra: Can you share an example of it? Like a specific incident where a claim could have been avoided?
Gary Beck: Yes, I often see and especially these days lawyers will leave one firm and go to another. And the first reaction is ohh do I need tail coverage. You don’t necessarily need tail coverage if you’re just moving firms, but what you do want to know is if your new firm will pick up your prior acts date at your old. The firm, the reason that’s important is because the Old Firm can. Forget to renew their coverage. They can do any number of things and you wouldn’t be aware of it and you would lose that prior acts coverage at the Old Firm. So you want to make sure, if possible, to have yourself endorsed onto the policy at the new firm with your same prior acts date. So that you don’t lose coverage, that’s just important to consider when you’re making a move.
Alexandra: Well, I’ve been again. Thank you as always for sharing information with us. It’s always a wealth of knowledge and it’s very informative. If anybody needs to have further information or advice, you can go to specspecialrisk.com to learn more, locate contact information or to schedule a meeting with one of our team members. Gary, thank you again for being with us today.
Gary Beck: Thank you for having me.
Alexandra: That’s a wrap, everyone. Thank you for tuning in this week. Stay tuned for more podcast coming out soon. This is Alex signing off.
FAQ
What is a claims-made insurance policy?
A policy that responds to claims made and reported while the policy is active, regardless of when the underlying work was performed — as long as the work falls after the policy’s retroactive date. Nearly all legal malpractice coverage is written this way.
How is claims-made different from occurrence coverage?
An occurrence policy is triggered by when the event happened; a claims-made policy is triggered by when the claim is made. That is why continuous coverage matters so much for lawyers: a lapse can end protection for years of past work.
What is a retroactive date or prior acts date?
The earliest date of professional work your policy will cover. Claims arising from work performed before that date are not covered, which is why the date must carry forward when you renew or change carriers.
Do I need tail coverage if I move to another firm?
Usually not. What you need is for the new firm’s policy to pick up your original prior acts date, so your history moves with you rather than depending on your former firm continuing to renew its policy.
